Soybean selling by Argentine farmers is poised for a marked slowdown after last month’s record spree, as the prospect of elections create political uncertainty, while La Nina undermines 2023 harvest prospects.
Argentine growers sold 13.7m tonnes of soybeans in September, exploiting the window to sell crop at an improved exchange rate, introduced by the government to boost market access to what is – in soyoil and soymeal, as well as beans themselves – the country’s top export.
The temporary creation of the so-called “soy dollar” offered a rate of 200 Argentine pesos per $1, well above the official level of 146 pesos per $1 as of the end of last month, if remaining below the informal “blue” rate of 284 pesos.
The improved exchange rate boosted the appeal of soy sales to farmers who have a long history of hoarding the crop as a dollar-linked hedged against a depreciating peso, and a domestic inflation rate of more than 90%.
‘Took advantage in droves’
“Unexpectedly… farmers took advantage of the programme in droves as the price of a metric tonne of soybeans rose from 52,000 pesos [per tonne] to nearly 72,000 pesos as the measure took effect,” the US Department of Agriculture’s Buenos Aires bureau said.
The resulting supply splurge lifted by 120% the number of trucks entering Rosario ports last month, compared with the trailing three-month average.
Argentine export registrations for September reached 3.98m tonnes – more than twice the 1.7m tonnes recorded for the first eight months of 2022.
‘Likely to slow’
However, the sales rate now looks set for a marked slowdown, thanks in part to the volume of soybeans already sold – with September’s spree equivalent to one-third of the 2021-22 harvest – but also the prospect of presidential elections next year, starting with primaries in August.
September’s “sales boom combined with elections in 2023, mean that farm sales of all commodities are likely to slow through August, when farmers will see the results of primary elections,” ahead of the actual vote in late October, the bureau said.
It added that a strong showing by the conservative opposition would “likely” prompt farmers “to hold onto to as much grain and oilseeds as possible”, in the hope of a change in government late in 2023, potentially heralding lower export taxes and the end of currency controls.
By contrast, “a stronger-than-expected performance by the ruling coalition in August 2023 could mean that farmers would begin selling in earnest to avoid any new taxes imposed by a re-energised Peronist government”.
‘Very concerned about drought’
Growers also face the uncertainty posed by a third consecutive year of La Nina, which typically curtails rainfall in Argentina’s major growing belt.
“Farmers are very concerned about drought conditions across much of Argentina,” the bureau said, adding that “there is currently very little useful soil moisture in much of the key central production region”.
While the dryness threat can prompt growers to stem their financial risk by seeding more soybeans compared with corn, which is a more expensive crop to grow, “farmers in many areas report that new varieties are more drought resistant than soybeans”.
The bureau cut to 16.85m hectares its forecast for Argentine soybean sowings in 2022-23, and 49.0m tonnes the estimate for output – figures 150,000 hectares and 2.0m tonnes respectively below the USDA’s official numbers.
The bureau flagged the potential for a further harvest downgrade should the yield fall below the 3.0-tonnes-per-hectare level it is factoring in, and which assumes “normal” weather conditions.
“Local analysts are already beginning to shave production estimates in anticipation of another dry year.”
Stocks to shrink to 10-year low
The bureau also revised its 2021-22 estimates in light of the September soybean selling spree, lifting to 5.5m tonnes the forecast for exports – more than twice the 2.25m tonnes that the USDA has pencilled in.
By contrast, the crush was pegged at 37.5m tonnes, 2.35m tonnes below the official USDA number, reflecting expectations of a fall-off “after the industry finishes processing the new influx of soybeans”.
Argentina’s soybean stocks will end 2021-22, as actually closes in March 2023, at 5.7m tonnes – 1.2m tonnes below the official USDA figure and “the lowest level of ending stocks in Argentina since 2012-13”.