Argentina’s Economy Minister Sergio Massa announced last week new incentives for soybean growers to sell more of their stocks. They will be able to access a better exchange rate, in an attempt to increase exports and dollar reserves.
The announcement covers incentives that are expected to last through September 30. Argentina is the world’s largest exporter of soyoil and soymeal, as well as the third largest supplier of soybeans.
Secretary of Agriculture Juan José Bahillo highlighted the changes in the “agri-dollar” regime, approved in August, to generate more hard currencies from the rise in the dollar for soybean growers, and clarified that contracts without fixed prices will be covered by this measure.
Bahillo indicated that the dollar at 200 pesos improves the income of growers, who sell at 50,000 to 52,000 pesos per ton, so the measure will allow revenue to increase by up to 70,000 per ton.
“Growers are going to invest in technology. Estimating the volume of liquidation is not easy because the will of growers must be calculated. They see that it is an attractive price and an opportunity,” Bahillo said. In addition, he acknowledged that the previous 70/30 system had bureaucratic issues that left operations too slow.
The change in the Argentine exchange rate affects the international soybean market, with repercussions in Brazil as well. The greater supply of Argentine soybeans pressured prices on the Chicago Board of Trade (CBOT) and premiums at Brazilian ports. In any case, we understand that the Argentine measure must have a limited impact on Chicago, on prices in Brazil, and Brazilian shipments in the coming few weeks. At first, the measure must last only until the end of September. Besides, Argentina is experiencing structural problems that affect the country’s credibility in the international market, which negatively impacts the country’s export business.
In Chicago, contracts maturing in November fell 0.58% last week, closing Friday at USD 14.12 a bushel. Besides the decision on the exchange rate in Argentina, the prospect of a full crop in the United States, the probable expansion of the area in Brazil and Argentina, and the decline in Chinese purchases helped to put pressure.
With the increase in the entry of Argentine products, the premiums in Brazil declined. The FOB price dropped over the week, marked by little activity, with holidays on Monday – in the United States – and Wednesday – Brazil. The 60-kilogram bag fell from BRL 191.50 to 187.00 in Paranaguá.
The domestic market was also pressured, and the business pace plummeted. Well-capitalized, growers expect better prices and prefer to sell corn.
Soybean prices decreased from BRL 185.00 to 181.00 in Passo Fundo (RS); in Cascavel (PR), from BRL 186.00 to 180.50; and in Rondonópolis (MT), from BRL 174.00 to 167.00.