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Argentina's New President is Bearish for Soybean Market

BUENOS AIRES, Argentina - Argentina’s new President-elect is expected to drop soybean export taxes considerably, creating market-fear over a wall of soybeans entering the global export market. 

The news sharply dropped the soybean futures market, initially Monday, though the complex rebounded today.

Maurício Macri, the current mayor of Buenos Aires, was declared the elected president of Argentina on Sunday. Daniel Scioli, the representative of the incumbent party, accepted the defeat. That means that the export taxes of soybeans in Argentina would be reduced gradually by 5% per year from  the rate pf 35% by December 10th, when Macri takes office, and the export taxes all other grains would be eliminated as well as all international sales restrictions regarding wheat, corn, oat or sunflower. Those economic problems have forced farmers to store grains as long as they could instead of selling to speculate with the currency value and to protest against the government by not generating foreign reserves.

Yesterday, in a press conference Macri reiterated his position: "I will keep what I have said in the last few months and we will cut the taxes at the day one of my government to bring profitability in the field". Another promise from the next president of Argentina was to fix only one dollar rate in the country (currently there are five different rates), but he did not specify yet when the local currency would be devalued and how these measures would take place. This another move that would boost the gains of Argentina farmers.

U.S. FARMER IMPACT

The top issue for U.S. farmers and the markets is that Argentina has an estimated stock of soybeans near 20 million metric tons, about five metric tons of corn and over five million tons of wheat. That would be sold pretty soon, according to most analysts, because much better conditions are coming for these farmers.

For the Director of Information and Economic Studies at the Rosario Board of Trade, Guillermo Rossi, it is pretty hard to forecast when exactly all this volume is going to be sold because the impact of the next currency might also bring a huge change for Argentina's farmers. "What exactly will go on, from here, is speculation. But there is a pre-conceived notion that the markets will be pressured, due to the selling all of this volume right away and when the unification of the currency will happen," analyzes Rossi to Agriculture.com. As of today, there is an official dollar value in Argentina of AR$ 9.60 and an informal value of AR$ 15.05.

Lorena D'Angelo, an analyst also based in Rosario, says that corn and wheat growers have more financial needs and would start the sales first. "Wheat and corn growers cannot wait very long. And I also think that with the local demand for soybean crushing and with the cut of the retentions (export taxes), the downward pressure internally would not be that big," she affirms in an interview.

As the country's Central Bank is in dire need of foreign reserves, there is a big bet that the government would ease all exports in the next 90-days. Patrício Lagger, a grain of the Rosario firm BLD, reveals that there is speculation that the government would lift 100% of the export tax for soybeans. "It is a time of anxiety for everybody, but farmers already feel that they are with more incentives to produce and sell," tells Lagger to Agriculture.com.

Less U.S. wheat to Brazil

An evaluation of Luiz Pacheco, owner of Brazilian consultancy Trigo & Farinhas, is that the Argentinian government will try to put at least three million metric tons of wheat into the Brazilian market in the next weeks. "The reduction of demand for U.S. wheat in Brazil will reduce because the Argentine wheat will be cheaper. The difference is near US$ 30 per tons," predicts Pacheco.

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