What is Happening with Argentine Farmers...and How it Could Ultimately Affect U.S. Crop Prices
Mar 28, 2013
Argentine farmers are holding back supplies of soybeans and the trade seems to becoming a little more concerned as farmers have only sold a fraction of the bushels they had booked by last year at this time. The problem is while prices have dropped over 20% from the recent highs, inflation in Argentina is clipping along at pace in excess of 30%. Point is producers are reluctant to sell at the recent discounts because the money they bank will hardly cover "break-evens" after factoring in the soaring inflation and the 35% export tariff. Also keep in mind tighter currency controls over the past 18 months have led to a widening gap in the official exchange rate. From what I am now hearing, farm leaders in Argentina have had enough and are going to meet in mid-April to discuss the possibility of launching a joint protest to halt ALL sales. Don't think for a minute they are not serious. Back in 2008 they staged a four-month protest when the government tried to implement increases in the export tariff. I suspect this battle could get extremely heated considering political leaders in Argentine are already putting pressure on the farmers to make more sales as they desperately need the revenue to keep the government afloat. In fact there are rumors flying around the Argentine farming community that the government recently sent tax inspectors from county to county to inspect inventories and to intimidate farmers into selling. Point is despite more export potential from South America there are still many wrinkles in the sheets. Delays in Argentina shipments could further increase US soybean and meal exports, at least for the time being.