South America Calling

How Quickly Will Argentine Farmers Sell?

Argentine farmers have had all their wishes come true over the last week.

On Monday, in his first economic announcement as president, Mauricio Macri swept away the hated quotas and tariffs on corn and wheat exports and reduced the tariff on soybeans from 35% to 30%.

Then, on Wednesday, he followed this up by getting rid of foreign exchange controls, effectively devaluing the peso.

This one-two punch significantly improves their margins.

The question is how much and how quickly will they sell now?

Argentina has massive grain stocks, built up over the last couple of years as a hedge against inflation and in the expectation that the peso would be devalued. The exact size of those stocks is unclear with estimates for soybeans ranging from 7 million metric tons (mmt) to 20 mmt. Add to that another 5 mmt of corn, and that is some stockpile.

The government wants a fire sale, as they are keen to attract precious dollars into the economy. Finance Minister Alfonso Prat-Gay said exporters had undertaken to export $400 million a day during the next three weeks.

Certainly, exporters can start shipping their significant stocks, but it is far from certain that producers will also sell hard into the market.

The primary reason would be that they may not get the prices they want.

Argentine soybean prices have rallied over the last six weeks in anticipation of the devaluation, reaching 3,000 pesos per metric ton at Rosario port on Wednesday, or up 36% on the two previous months.

However, the peso did not devalue as much as anticipated on its first day floating Thursday. The currency slid from 9.8 to the dollar at the close Wednesday to 13.9 in afternoon trade Thursday when most thought it would go nearer the 14.8 quoted on the black market Wednesday. That meant soy actually slid in Rosario Thursday, at around 2,850 pesos per ton and business was slow.

Farmers hope to get more out of the devaluation and will only sell a couple of million tons more than planned if prices don't rise further, said Dante Romano, a grains analyst at the Alabern Fabrega brokerage in Rosario.

He expects Argentine soybean carryover stocks to remain large come April.

"If you were calculating that carryover was 10 mmt before, now it would be 8 mmt," he told DTN.

Other analysts say farmers may hold on to stocks as a hedge against the failure of Macri's economic plan. After all, it will be no easy task to manage the vying demands of surging inflation, growing fiscal deficit and a less-than-solid balance of payments situation.

According to Jorge Ingaramo, a local economist, farmers will sell according to their financial necessities.

Others believe farmers will take advantage of the devaluation to sell amid a lack of credit and the prospect of sky-high interest rates on their pesos.

Producers will likely sell $3 billion to $4 billion of soybeans, corn and wheat by Feb. 1, which would be the equivalent of around 13 mmt, Gustavo Lopez, a grains analyst at Agritrend, told La Nacion, a local daily

He sees sales rising to around $10 billion by the end of the crop year on April 1.

Alastair Stewart can be reached at

Follow him on Twitter at @astewartbrazil



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