“The Challenges of Agro-Exports: Currency Liquidation and Drought Impact Sales in Argentina”

2023-04-24 23:33:00

Despite the entry of US$105 million made today within the framework of the soybean dollar of the Export Increase Program (PIE), agro-exports alerted the Government that “the currency liquidation is over.” As this medium was able to learn, this message let him know why the money entered so far under the PIE, which accumulates US$1,360.8 million according to the Rosario Stock Exchange (BCR), came from pre-financing exports to buy the grain to producers. This before a flurry of sales from farmers. The exporters estimated to liquidate by the end of this month US$2500 million, half of the planned goal of US$5 billion from the program.

In this context, beyond the money received by the companies, in the activity they talk regarding the low sale of the oilseed by the producers, due to the drought, which complicated the operation. Meanwhile, in the productive sector they mention prices, which have not been satisfactory to reactivate marketing.

To encourage producers, Agro-export proposed extending the tool, which has an end-of-May expiration date, and eliminating a Central Bank (BCRA) regulation that made credit more expensive for those who keep more than 5% of soybeans in stock. These initiatives of the exporters would have been rejected by the Government.

“Today was a relatively positive day; they entered by the soybean dollar US$105 million and in the cereal-oilseed complex more than US$208 million [entre todos los productos]”, indicated.

In the midst of the drought, which caused yields to fall, and producers who do not find prices attractive, the exporters proposed to the Government that the BCRA eliminate the restriction of access to credit for producers who have stock of soybean higher than 5%. They explained that the proposal was not considered by the entity that directs Miguel Angel Pesce. The other alternative, extend the agricultural dollar mechanism for soybeans, or make an improvement in the exchange rate, “She was not heard either.”

According to Buenos Aires Grain Exchange, The tons negotiated in terms of new contracts and fixings accumulated until last Friday 1,181,657 tons. In this way, the traded volume was 82% and 55% below what was registered during the accumulated figures of last September and December, respectively.

In the agro-export sector they consider that A difficult week is coming because the exchange gap has discouraged the sale of soybeans by producers. “He has brought it to zero. There are no soybean sales in Argentina at this time. There is a delay in the harvest, it is true, and the strike of transporters paralyzed whoever wanted to sell”, they indicated.

The Minister of Economy, Sergio Massa, announced the measure at the beginning of this month before the different sectors of agricultural exports

“The producer when an exchange rate gap greater than 100% passes it paralyzes its sales because it understands that a devaluation is coming. This has happened historically, that is, when there is an exchange gap that moves every day, it automatically leads to a stoppage in the grain trade,” said the source consulted.

One of the reasons why the producer has not gone out to sell is that, in some way, he seeks to protect part of the soybeans to fulfill, among other things, the commitments of rental contracts. The 20 million tons that in agro-exports they calculate that there will be on a harvest that “does not exceed 22 million tons” the producer “is going to try to sell them at the best possible price or is going to wait longer”.

In the industrial sector they said that they cannot offer more than $98,000 and $100,000, which is the price they can pay at this time “so as not to lose more money.” They added: “Everything that exceeds that value would imply a million-dollar loss,” they said.

Another not minor point is that the agricultural dollar for the regional economies is not moving either. In the case of these activities, there would have to be 2,800 registered companies; however, last weekend there were 23 enabled. The Ministry of Commerce, portfolio that leads Matthias Tombolini, it set strict guidelines for internal price increases for those who export within the framework of this program.

Due to the drought, there were considerable losses in the producersLUIS ROBAYO – AFP

Ariel Tejera, Head of the Market Analysis Department of Grassi SA, indicated that everything in the market continues to be very calm. “Business is done marginally. The offer is standing far from the prices proposed by the demand. Added to this is the instability in the exchange markets that discourage producers from closing sales,” he stated.

For the expert, the improvement of an exchange rate to $300 is being completely eroded by the jump in the stock exchange rates. “At the same time, with the increases in the positions of the dollar futures market, July already points to an exchange rate of $297. This is what the producer is seeing and chooses to sell only what is necessary”, he summarized.

This situation, he indicated, added to the external context does not help either. “International prices remain highly conditioned by Brazil [tiene una cosecha récord superior a 153 millones de toneladas]which brings peace of mind to the markets. It is difficult to think of a bullish environment that allows local prices to recover and make them more attractive in the short term”, he clarified.

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