December 9, 2013
Farmers hoard soy as protection against falling peso currency
Sales lagging behind last year’s pace
Sales of Argentine soybeans are lagging this season due to expectations for higher world prices later and to domestic financial uncertainty that has prompted farmers to save in beans rather than pesos.
With world food demand on the rise, growers in the Pampas grain belt are filling their silos with soy rather than converting their crops into pesos, a currency that hit a new all-time low in informal trade this week.
Considering Argentina’s high inflation, clocked at about 25 percent by private economists, “money in the bank” is not as secure as storing soybeans next to their fields, many say.
“We are going to hang onto our soy. One can see higher prices ahead,” said Jose Plazibat, a partner with the firm of Bandurria and Plazibat Brothers, which farms more than 3,000 hectares near the town of Chacabuco in Buenos Aires province.
South and North American growers remember that prices hit record peaks during a drought in the United States last year and they are holding out on prospects for another weather rally this season.
Argentina is world’s third-largest exporter of soybeans and government officials, eager to get their hands on soybean export revenue, have told growers to keep soy flowing into export markets.
Cut off from global bond markets since its 2002 default, Argentina needs farm revenue to help finance public spending increases ahead of October legislative elections.
But Argentine grain are moving slower this year. The Rosario grains exchange says farmers sold 26 percent of their 2012/13 soy as of April 10, way under the 46 percent registered at the same point in the previous season.
The 2012/13 season started with widespread flooding in the Pampas that slowed planting and it ended with a January-February dry spell that pressured yields.
The government expects a soy crop of 51.3 million tons, which is lower than original estimates. The Agriculture Ministry said 38 percent of the 19.1 million hectares of soy planted this season have so far been harvested.
“Yields are very irregular due to the uneven weather we had at the beginning and end of this growing season,” said Juan Solari, a partner at the Emidelia Solari farm near Chacabuco.
He estimated average soy yields in the region at about 3 tons per hectare and corn at about 10 tons per hectare.
Argentina is expecting a record-large 2012/13 corn harvest of 25.7 million tons, thanks in large part to new genetically modified technology that will improve yields. The Agriculture Ministry said 43 percent of the 4.6 million hectares planted with corn has been brought in to date.
Growers say they would plant more corn if the government would stop placing curbs on exports. The farm sector has long feuded with President Cristina Fernández de Kirchner, who won re-election in 2011 on promises of increasing the government’s role in Argentina’s economy.
Confidence has since softened. The peso has slumped in the informal market, opening a breach of 71 percent versus the formal exchange rate and increasing market chatter about a possible devaluation to shore up exports.
The government is likely to put off a devaluation of the official peso at least until the October elections have passed.