The government has started to assume the worst case scenario the worst drought in 60 years. The Ministry of Economy continues to refine the numbers, while the negotiation of a reduction in the objectives with the IMF is delayed, precisely due to the impact of this phenomenon, on bird flu and the war in Ukraine. Close to Sergio Massa estimate a US$9.6 billion loss in dollar revenue, an optimistic calculation compared to the US$14.2 billion expected by the market.
It remains to be seen what will happen in the next three weeks with the rains to define whether the damage will be extensive or reduced. “You have to wait 20 days to get updated dataso far the impact is US$ 9,600 million focused on the lack of production in the wet core of the pampas, but there is high production in northern Argentina, on the coast and in central and southeast Buenos Aires province” , they reported in the official offices.
In its latest forecasts, the Rosario Stock Exchange (BCR) cut production to 11.5 million tons of wheat, 27 million tons of soybeans and 35 million tons of corn, with reductions of up to 36% compared to the past cycle. With the latest adjustments, the Economy was close to the numbers for the private sector, but still with higher forecasts. In the case of soybeans, the estimated harvest fell from 37 to 34 million tons. “It’s getting worse,” they acknowledge in Agriculture
In addition to production, the Government is monitoring three other sensitive fronts. The first is the postponement of shipments to ensure the domestic market, which implies less foreign exchange. Last year, Massa extended grain exports by 360 days between December 1 and February 28, 2023. And last Tuesday, it extended corn exports by 180 days between March 1 and July 31, nearly as much as 90% of exports expected in 2023.
The other factor isto the acceleration of temporary imports from Brazil, Paraguay and Bolivia, which could represent $2.4 billion. Sources in the agro-export sector estimate that purchases to support the milling and re-export of soy products have reached 1.5 million tons at this point in 2022, while today they reach 2 million tons and could amount to 8 million in the 2022/23 campaign. double compared to the previous cycle.
“About 2 million tons have been imported so far, unfortunately there are no possible measures to mitigate it because there is no way to replace cereals, except soybeans from Paraguay and Brazil, which is a palliative,” said one exporter . Most of it – about 5 million tons – would come from Paraguay, to reduce the spare capacity of the sector, which already reaches 68%. Even so, processing would hit its lowest level since the 2008/09 cycle.
The third indicator that attracts official attention is the stock of cereals held by producers and gatherers. The government believes it retains 6 million tonnes and will have to sell them, which would allow the Central Bank to replenish its reserves. Private estimates range between $1.5 billion and $4 billion, but producers are expecting $3 soybeans first, after ending the differential exchange rate at $230 in December.
Therefore, the collapse of the sector that generates the largest amount of foreign exchange increases the pressures on the performance of the economy. For Ecolatin, puts more emphasis on the strategy of keeping the official dollar rising at a rate that avoids a moderate devaluationit complicates the objectives with the Fund, affects the level of activity and the restriction on imports will continue to put pressure on inflation, which will add difficulties to maintaining price agreements.
For now, Afip has warned that it has begun evaluating measures on silo bags after the 9.5% real year-on-year decline in the February harvest. And customs has intimidated grain companies Cofco, Cargill, Bunge and Dreyfuss over alleged maneuvers to pay less withholding taxes on exports of soybeans previously imported from Paraguay, worth $50 million. The temporary importation regime therefore remains in the crosshairs of the authorities.
AQ
Source: Clarin
