Although players involved in the grain trade had spoken repeatedly about the distortions and gaps in physical and future prices, the news fell like a bombshell: Cargill and ADM, two of Argentina’s largest agro-exporters, warned their customers, via WhatsApp messages , that they will no longer be governed by the blackboard prices of the Arbitration Chamber of Rosario for their commercial corn fixing operations, but they will do so through what is known as a “buyer’s market”, i.e. an estimated price they consider. Only, there hasn’t been any formal communication to the institutions involved.
The multinationals’ decision is due to the fact that they believe that the prices of the corn they use as a reference for purchases they are distorted, that is, they are higher than they would actually have to pay, as a side effect of the soy dollar. This price results from the information provided by numerous operators and from the official register of transactions carried out (SIO-Grains), daily, plus a percentage of the transactions carried out “in the future”. Product deliveries are usually agreed and the price is subsequently set within a pre-established period.
The background to the conflict is as follows: Many players sold more soybeans than they had planned in September and December at the price differential ($200 and $230 per dollar) offered by the national government under the export increase program. In this context, inventories and exporters have sold soybeans that they did not have available to take advantage of the higher value of the currency and are now forced to pay a slightly higher price to be able to obtain the missing goods, raising the price of the Blackboard. This is what the big agro-exporters are asking.
But there’s more. Currently there are few corn operations, what little producers have left will be held up as for the moment (after the higher volume of sales made by the Soybean Dollar) they do not need to liquidate further corn reserves.
On the other hand, the early sowing of the crop, for the most part, has failed due to drought and it is expected that in the coming months there will be a shortage of produce, pushing up prices, with which they will keep it longer as long as possible.
Faced with this scenario, some buyers offer a higher price to stock up on corn, which is why the large agro-exporters have decided to leave the field, without warning, as they believe they are distorting the Blackboard upwards.
Provided that this does not affect the operations already agreed with the blackboard price and the setting method is not changed, yes, it applies to new businesses. But now the big grain companies urgently need to decide what to do with their purchases and think that reaching an institutional agreement could take weeks, so they have suddenly kicked the hornet’s nest. It is that once the agreed fixing terms have expired, the producers do not want to fix a price and run the great risk that, when the time comes to ship the committed goods, they will not have it.
The announcements of the multinationals shocked the market. At the Rosario Stock Exchange there is concern about the damage to the institutional framework that this measure entails although they stress that this is a matter that needs to be resolved by the Chamber of Arbitration, which is made up of representatives from all links in the national granary supply chain.
From the Rosario Stock Exchange they support it Solutions to differences must be discussed and agreed upon within the institutions – and not unilaterally – respect and take care of them since their strength lies precisely in the integration between the actors, the markets and the entities that compose them. Otherwise, all the decisions and information that could come out of it would start to lose credibility and representativeness, and it would be like shooting yourself in the foot.
Source: Clarin
