The Argentine central bank Thursday launched a dollar-linked bond scheme aimed at stimulating farmers to sell the soybeans they have stored in silo bags.
For the next six months, the government will offer grain exporters bonds that yield 3.65% per annum and are tied to the peso-dollar exchange rate. The bonds can be transferred to farmers in return for soy and other grains.
Farmers have been stockpiling soybeans all season as a hedge against inflationary pressure and a possible devaluation of the currency.
The strategy has caused great stress for the government, which is in dire need of the dollars it gains from taxing soybean and grain exports.
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Under the current system, exporters are forced to convert soybean export revenues from dollars into Argentine pesos at the official exchange rate, which Thursday stood at 6.24 pesos to the dollar. However, the floating black market rate is currently 50% higher at 9.36 pesos to the dollar.
In addition, the government pockets 35% of all soybean export revenues in taxes.
Meanwhile, runaway inflation chews away at the purchasing power of the pesos that farmers do receive for their beans.
Faced with this situation, it is understandable that Argentine farmers have hoarded soybeans in the hope that in the future economic policy changes and the official peso is devalued.
According to Rosario Cereals Exchange, farmers retain 25% of the 48.3 million metric ton crop they harvested between April and June.
The government will make bonds for up to $2 billion will be made available, while farmers have stocks worth around $6 billion, according to local press reports.
Farmers will likely be very cautious about entering into the scheme.
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