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Pablo Adriani
Agricultural business consultant
The boomerang of the “soybean dollar” at $ 200 could have the first direct consequence the worst quarter of foreign currency income of all our contemporary economic history. These are the last three months for which a monthly foreign exchange income is calculated of $ 1.1 billion in October, $ 1 billion in November and $ 800 million in December.
Thus, the forecast exchange income for the October-December quarter shows an accumulated amount of $ 2,900 million versus $ 7,136 million entered in the same quarter of 2021.
Today, 14 million tons of unsold soybeans remain in the hands of producers, equivalent to $ 7.84 billion; 8 million tons of corn with an estimated value of $ 2,320 million and 1.5 million tons of wheat, equivalent to $ 525 million. The numbers speak a total of 10,685 million dollarsof which soy represents 73%.
Once again, soybeans are the spoiled child who grabs the attention of business and central bank officials. Will the government have value, or will it have the urgency? To charge a “soybean dollar” at $ 225 (includes the dollar two-month inflation upgrade at $ 200). If this were the case, corn should not be excluded, so as to put the two products on an equal footing. But before including corn in the “corn dollar” at $ 225, the government should enable export logsfor at least 5 million tons, so that exporters can export what they are about to buy.
In the case of wheat, perhaps it would be best to do nothing why the production prospects for the new crop are very pessimistic, the drought has already taken 5 million tons. Will need physical wheat available to meet the demand of the mills and the internal market. In this case, only the market will regulate prices, upwards, as we have seen in the last couple of months with the $ 60 per ton improvement in the value of available grain.
September 2022 will be remembered in the history of world trade and Argentina as the only time growers sold 30 percent of their entire soybean crop in just four weeks. The fact had a direct impact on record earnings in foreign currency for a single month, which the Central Bank has just confirmed $ 8.7 billion, of which $ 7 billion corresponds to soybeans and the rest is distributed between oils and soybean and corn flours.
The measure success implemented by the Ministry of Economy, a 40% devaluation tailored for a single product, expiring on 30 September, is demonstrated by the volume of sales and fixings of soybean producers for a total that exceeded 14.5 million tons.
Now you have to ask yourself, what will happen the next day? What will foreign exchange settlement look like in the last quarter of the year? And if that worries the government, what should it do to encourage the sale of soy and corn, the only two products that producers now have in their silos and which, based on the current conditions will be very difficult to sell.
The low foreign exchange income projections for the quarter are due to the fact that 73% of the amount of potential dollars to enter the system comes solely from the soy that the producer has today in its silos. Therefore it will be very difficult for the producer to get rid of his soybeans if he does not have an additional motivating factor let him do it.
Foreign exchange earnings projections are not very encouraging and the fact that producers sold 14.5 million tons of soybeans in September already detracts from volume and the willingness to sell soybean producers are still unsold. if the conditions for this to happen prevent it. That means, if there is no new soybean dollar to induce the producer to sell during this quarter, the decision will be not to sell and spend the next year on sales.
Here the producer is wrong, because the “inverse” (fall) of $ 24 per ton in the market between the price of available soybeans ($ 394 per ton) and that of new soybeans ($ 370 per ton), would indicate that the producer is expected to sell all of its available soybeans in October. Obviously a little push from the government would help producers to guide their decision to sell.
Right now producers have 14 million tons of soybeans available for sale10 million have it stored in their silos or delivered to the collection and 4 million delivered to fix a price.
It is very unlikely that soybean producers who have already sold the equivalent of $ 7 billion need to sell. This could be the boomerang for the government during the last quarter of the year, which will face a currency wastelandif a producer who managed to consolidate a liquidity that he did not expect to have at this time of year.
Another big issue, summer is coming, historically this time it has been taken by governments to make unexpected, sung and necessary adjustments to economic variables, which they don’t dare to do before the holidays. Producers know this, they sense it summer could be very busy in economic termsand for them the only way to be covered by possible changes in the exchange rate is to have dollars, or grains that are essentially dollars.
So, by way of alternatives, what options does the government have to generate more sales from manufacturers?
* Open corn export records immediately, don’t wait until the last day to do it. If necessity forces you to make this decision, do it now.
* Enable one dollar at $ 225 for soybeans and corn for a limited time, such as November.
We can anticipate that if the government does not try to encourage producers with concrete measures to sell their cereals, it will face the quarter with the worst foreign exchange gains and a summer with many unknowns in terms of economic measures.
Source: Clarin
