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Tuesday, April 29, 2014

US$900M in grain exports

Dollars continue to flow in with the bulk of this season’s harvest.

Highest weekly number reported so far this year

The CIARA and CEC grain export chambers — which account for a third of all exports from the country — posted the highest level of weekly settlement by the sector so far this year, with US$900.5 million traded in the seven days ending April 25.

Agri-dollars have flown in quicker in the thick of this year’s harvest season, with last week’s trading leaving the total settled so far at US$7.348 billion.

The chambers define settlement as “buying grain that will later be exported in its original state or after industrial processing.”

Last week’s new record for the year outdid the US$825 million sold during the week ending April 11, but the recent consistently strong participation by the Central Bank (BCRA) on the foreign exchange market provided a hint of what was to come.

On Friday, the BCRA bought US$330 million, allowing it to raise its international reserves by US$201 million, closing the week above the psychologically important US$28 billion mark at US$28.09 billion, despite allocating US$100 million towards energy imports.

The purchase was the third-largest by the country’s monetary authority since the end of the peso’s parity against the US dollar in January, 2002, coming off the back of the acquisition of US$390 million on April 15.

The largest single-day purchase by the BCRA remains the US$413 million acquired in December of 2011.

Grain settlement and the acquisition of greenbacks by the BCRA, which is headed by Juan Carlos Fábrega, form part of a cycle, as the influx of hard cash during the harvest season provides the monetary authority a cushion to prop up reserves.

The bulk of the harvest for Argentina’s main crop — soy — takes place between the end of March and July every year, implying relief for the bank’s foreign reserves and the likelihood of a stable exchange rate up to the latter month.

In 2012, during the April-July period of seasonal activity, the average rate of grain settlement clocked in at US$590 million compared to the US$350 million average for the first quarter, according to Dujovne & Asociados.

Last year, the former average came in at US$660 million, and the latter at US$340 million, and the consultancy expects this year’s forecast of a record harvest will take the average rate of settlement this season to approximately US$700 million.

Should such forecasts become reality, the amount settled in 2014 would surpass the chambers’ record of US$25.33 billion, set in 2011.

Strongest since 2003

The Central Bank’s participation on the foreign exchange market in April so far, acquiring US$2.5 billion, has been the strongest since 2003, emphasizing the pivotal role of the agricultural sector, but also “the issuance of debt by (state-owned oil company) YPF,” according to the Elypsis economic consultancy.

Not including the last three working days of the month, reserves have consequently risen by US$1.1 billion, Elypsis adds.

“The export sector has become a source of expansion for the monetary base once again,” said Eduardo Levy Yeyati, the consultancy’s director.

The narrowed gap between the official dollar exchange rate and the illicit “blue” rate since the sharp devaluation in January have encouraged farmers to open up their silos and sell, although Elypsis warns that “a somewhat more lax monetary policy and the purchase of dollars by the Central (Bank) have awoken the ‘blue,’” in reference to the illegal dollar exchange rate, which rose 35 cents last week.

On the official market, the dollar traded steady at 8.01 pesos yesterday, while the “blue” dollar started off the week at 10.70 pesos, thirty cents higher than a week earlier.

Herald staff

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