Argentina building 'wall of soybeans'
Argentine government officials recently announced major changes with regard to currency that may impact the grain market and mostly Argentinian farmers. The most relevant announcement was that the citizens were free to purchase foreign currency, such as the US Dollar. As a result, the Argentine Peso devalued and one dollar was buying AR$ 7.99 last Friday. In the aftermath, the government have limited the purchases of dollar up to US$ 2,000 per person each month.
An Argentine Peso with an official value closer to the parallel dollar was a long-time demand from grain exporters that wanted to profit more with external sales. Now, on the other hand, the benefits are just "partial" for those local farmers, according to Eduardo Buzzi, president of the Argentine Agrarian Federation. The reason is that the price of inputs are also affected by the official US dollar value and not all farmers are capitalized enough to hold it for that long. "Nearly 80 percent of the grains will be liquidated, but 100 percent in some cases where there are debts. Some might stay with 15 to 20 percent of reserves because they can hold longer and don’t trust the economy", Buzzi told reporters in a press conference.
There is a broad consensus among experts from Argentina that an untrustworthy economy might make farmers to hold their stocks of soybeans, estimated at seven to eight million tons or US$ 4 billion. "This is a very complicated panorama. There is a big perspective of the devaluation (of the local currency). There are partial measures of the government every day and a significant lack of confidence in the market. The government had said for long that would never devalue the currency", explained Pablo Fraga, a market analyst at BLD, a company from Rosario.
According to Fraga, significant sales of soybeans would not happen before the middle of March, when the harvest of the new crop takes place. In the meantime, Guillermo Rossi, a market analyst at the Rosario Board of Trade, believes that the sales will depend of the expectancy of better prices of the oilseed in Chicago. Rossi also thinks that the farmers that can sell wheat will do it first. "Wheat at the domestic market is probably the next thing that will happen. A low volume was sold and there is a big stock (estimated at nine million tons). There is also a very small allowance to export (1.5 million tons)", explained Rossi. On wheat exports, Argentine farmers need permission quotas to sell at the global market.
Currently, the government of Argentina is in dire need of more reserves, especially in US Dollars. Rumors say that it would raise retentions rates on soybean exports (now at 35%). If that is confirmed, the rural sector of Argentina might strike. But given the fact that the political capital of the Kirchner government is lowering, that becomes unlikely. "The Central Bank of Argentina keeps losing reserves. The solution would be more retentions because the field is the only sector that generates dollar, but there is no political capital left for that. It is just a rumor", said Pablo Fraga.
As of this Friday (01.31), the official rate of the dollar in Argentina is US$ 8.02, while the parallel dollar is worth AR$ 12.75. There is no estimate on the number of Argentinian farmers in debt.
In neighboring Brazil, there is less tensions with the government. But there is a growing preoccupation with logistics. The mindset is that the country would repeat the scenes of the long truck and ship lines of 2013 to send the grains to China.
In an interview to Agriculture.com, senator and president of Brazil's Federation Kátia Abreu predicted that the logistics situation of Brazil would not be as chaotic as last year because the country did not sell the same amount of corn in advance and did not have the same output. But with strong demand for American corn, a record soybean crop in Brazil, and with an infrastructure that was no upgraded in the country, that concern remains.
Carlos Cogo, a consultant from Porto Alegre, thinks that the situation in the coming months will be as problematic as 2013. He agrees that traders and other big players will be more prepared to organize the logistics, but will be impossible to avoid major traffics jams in the ports. The port of Rio Grande, over 1,000 miles away from Mato Grosso, became the main exporter of soybean in the country shipping even from Rondonópolis, Mato Grosso, to China."Brazil will have a record soybean crop. Plus, I don't believe in the government about the corn exports. I think the corn exports will have the same volume of last year and our infrastructure is the same", opined Cogo, adding the the freight will increase at least 10%. The consultant said that cancellations of orders in April or May, at the peak of the sales, might happen again on the part of China.
The port of Paraná informed Agriculture.com that it has been monitoring that seas and is preparing shipping based on total estimates of Brazil's grain production this year. According to the port, the ships currently in line are the in anticipation for future contracts.
Crop/Weather update in Brazil
In the center-western state of Mato Grosso, in Brazil, the soybean harvest has reached nearly 10.6% of the total 20.5 million acres, informed the Mato Grosso Institute of Agricultural Economics this Friday. Productivity in that state, the largest producer in Brazil, is expected to be higher than average. Compared to last year, the harvest is 11.4% delayed because some recent rains have stopped work. In Paraná, where harvest is still under 5%, a record production is also expected. In Rio Grande do Sul, harvest just begins in March, but the weather has been drier than the average.
One of latest projections for the total production in Brazil is from Safras & Mercado, a consultancy from Porto Alegre, Rio Grande do Sul. It puts the country with 91.8 tons soybean production. AS most estimates have been increasing the output of the oilseed in the last weeks, the Association of Soybean Growers of Brazil announced that is impossible that Brazil would reach a production of 95 million tons of soybeans.
Editor's Note: Luis Vieira is a contributor for Agriculture.com. See more from Luis at Agrosouth-news.com.