From The Editor
Feb. 12, 2013
Hello Pro Farmer Members!
Things are changing fairly quickly in the grain markets. The weather outlook for Argentina seems to be improving, as does the outlook for southern Brazil. Brazil's northern production areas are still soggy, but this week is a bit drier than originally expected, so some progress should be made.
The rain in Argentina, believe it or not, is too late for some of the crops. There will be some yield damage to corn and soybean yields, but it probably won't be as "bad" (or as "good") as the range of estimates for Argentine corn and soybean production suggest right now.
More importantly might be the financial situation in Argentina. Farmers just don't want to sell last year's crop, let alone this year's production. We mentioned in last week's Pro Farmer that an Argentine government official had commented they are considering "finding farmers that are hoarding grain" and forcing them to sell. Normally, the it's the market's responsibility to give growers incentive to sell, but the situation in Argentina is far from normal.
First... consider the 30% inflation rate. That means commodity values are rising, but the value of cash is falling. So as soon as farmers sell beans and turn them into cash, that cash starts losing value.
Second... the exchange rate. Argentine soybean farmers sell beans at the official exchange rate. At last check, that was about 4.5 pesos to the dollar. However, the black market is trading at about 7.5 pesos to the dollar. Trading anything at the official exchange rate nets Argentine farmers about 40% less than if they were trading dollars in the black market.
Third... the export tax. Beans leaving Argentina carry a 35% export tax... and exporters don't pay it. The export tax is taken straight off the price offered for soybeans.
When everything is said and done, Argentine farmers pocket only about 20% of the value of soybeans sold. I wouldn't be a very "willing seller" in that situation, either!
Next up will be a dockworkers strike. They say wages aren't keeping up with the rate of inflation... which I'm sure they're not. That's tough to do in a hyper-inflation economy.
If you haven't checked out My Grain Trades on your homepage yet, please do that this weekend. This is an exceptionally valuable tool that will help simplify your marketing efforts in the year ahead. Click here to go to the introductory page. It's a free service for Pro Farmer Members that helps you keep track of your grain sales and figures your profit potential on the fly. Just check it out...
Pro Farmer's Marketing Education Series is also now available. It is what the title suggests... a series of workbooks designed to help you make better marketing decisions. Click on the link to learn more about this new project we're putting together.
That's it for now...
Follow me on Twitter at @ChipFlory
To join Pro Farmer, click here!