(KMAland) — Argentina’s government recently announced incentives for farmers in the country to sell more soybeans.
In an effort to boost exports and hard currency reserves, farmers can get a better exchange rate for their soybeans. Dr. Michael Cordonnier, agronomist at Soybean and Corn Advisors, Inc., says this will have a short-term impact in the country and in the global market.
“This favorable exchange rate is good until the end of September. Currently, Argentinian farmers are selling about 10% less than last year. They will sell after this exchange rate because it is like a gift for them The exchange rate is 139 pesos to the dollar, but now you have the right to make soybeans at 200 pesos to the dollar. So they will sell. And at the end of September, the Argentinian farmer could be up to the normal sales, maybe a little early, but this program ends at the end of September, after that it goes back to where it was before, when you get to October 1, farmers will again stop selling or, at least, sell more slowly.
He says the move will put more Argentinian soybeans on the world market and prices will likely fall, but the impact won’t last long.
“There’s going to be like a whiff of soybeans, along with flour and oil. Now in Argentina, it’s mostly flour and oil that comes out. So processors like the Cargills of the world were running maybe 50-60% capacity in their grinding facilities because they couldn’t get the soybeans. Well, now they’re going to have it, so there will be a bit of soy, meal and oil for the next two weeks, but we’re kind of back in the same way from October.
Argentina is the world’s largest exporter of soybean oil and meal and the third-largest supplier of soybeans. Cordonnier explains why the government made this decision.
“First, farmers are slow sellers because they were waiting for a devaluation. The official rate at the moment is 139 pesos to the dollar, but the black market rate is double that. So the market was saying there had to be a devaluation, so the farmers want to wait for the devaluation. Well, that didn’t happen. But instead the government said, okay, we’re going to raise it to 200 pesos to the dollar. It’s not a devaluation per se, but for the farmer it’s almost the same as a devaluation because he puts more money in his pocket when he sells to the grinders in Argentina. After all, the grinders are allowed to exchange their exports at the rate of 200 pesos for 139. So it’s a gift for them, and they pass on a gift to the farmer, but it’s only temporary.
He also says that the inflation rate in Argentina will likely reach 90% by the end of 2022.