March 8, 2014
Grain firms have 6 days to sell US$803M
Settlement clocks in 15 percent higher to date than same period of 2013
Grain export firms grouped under the CIARA and CEC chambers — which represents a third of the sector — have settled US$1.197 billion in February so far, leaving six days to sell US$803 million worth of produce in order to fulfill the promise they made to Cabinet Chief Jorge Capitanich to introduce US$2 billion to the economy, which is currently starved of hard currency.
The mark of US$2 billion may not be reached, but the government has taken relief in significantly higher sales during the first 55 days of the year compared to the same period of 2013.
So far this year, firms have sold US$2.66 billion worth, when up to the same date last year, they had settled nearly 15 percent less.
Since the meeting with Capitanich, CIARA and CEC have consistently reported accelerated weekly settlement. Last week, the balance weighed in at US$281 million, 64.14 percent more than the US$171.2 million during the same five working days of 2013.
“The majority of foreign currency income for the sector is generated well before export, an advance that takes place approximately 30 days in the case of grain sales and 90 days in the case of oils, protein-fortified flours,” CIARA and CEC stated in a joint report, adding that such advances depend on harvest performances and the type of grain.
The chambers also emphasized that increased settlement was strongly linked to requests for foreign credits for the purchase of grain, “which is then exported, either in the same state or as processed products.”
The steep and sudden 22-percent devaluation in January thus endures as enough of an incentive for farmers and export firms to empty up silos, sign off shipment orders and load up freighters. Such increased settlement rates appear to substantiate the allegations by the government late last year of grain hoarding as speculation over the peso’s steady depreciation.
The so-called “blue dollar” dropped five cents yesterday to 11.75 pesos, while the slightly de-regulated official peso strengthened two cents to 7.84 against the greenback, still five cents higher than the 7.79 registered on February 18.
An ambitious promise
On February 7, the farming heavyweights told government officials that the sector would be able to bring between US$27 billion and US$29 billion to the table by the end of the year, approximately equivalent to the total amount currently in the Central Bank’s foreign reserve account, severely depleted last year by deficient energy and tourism sectors, along with the now-reduced gap between the official and black market dollar rates.
Present at the meeting with Capitanich — who was accompanied by Economy Minister Axel Kicillof and Central Bank Governor Juan Carlos Fábrega — on February 7 were CIARA head Alberto Rodríguez, Cargill CEO for Argentina Hugo Kranjc and CIARA vice-president Javier Racciati.
During the first week after the deal was struck, export firms reported that year-on-year weekly grain sales decreased 6.4 percent, with the red ink turning into a black 10 percent by the end of the seven days after and paving the way for the near-15 percent hike registered last week.
Buenos Aires Grain Stock Exchange estimates this year’s soy harvest will be in excess of 55 million tons, which would likely lead to the influx of US$30 million.
Soy traded at US$508 per ton in Chicago yesterday, 4.4 dollars or 0.88 percent higher than on Friday and US$42 above the rate registered 25 days ago.
Since the end of January, soy prices have risen 8.9 percent, currently clocking in the highest rate since mid-September last year.
This evolution reflects the “climate conditions that have affected crops in Argentina and Brazil,” said Lucía Pignani, an operator at Futuros y Opciones (FyO). The analyst said soy futures are likely to reach record levels in the near future.
Herald with Télam