From
Paul Adriani
Pablo Adriani & Associates
On Jan. 22, we anticipated that “the field would contribute $20,000 million less in foreign exchange in 2023 as a result of the worst drought experienced in our entire history.” Reality confirmed what was plannedand at the time it was assumed that the drought would continue through the summer of 2023, which it has.
The foreign exchange inflow projection set out in that note was US$950 million for January, US$700 million for February and US$1,000 million for March. Reality scored $928 in January, $645 million in February and $1,228 in March. THE the certainty of the prognosis allows us to make a calculation compared to sales for the rest of the year.
He period in relation to foreign currency income It obviously includes the latest measures taken by the Ministry of the Economy. And in a long-term look, what foreign exchange revenue might look like in the third quarter (affected by PASO) and in the fourth quarter (with presidential and legislative elections).
For the second quarter, April-May-June, our projection estimates a foreign exchange inflow of US$7,439 million (see infographic). This estimate assumes a sales volume for the entire quarter of 4 million tons of corn, including back-crop merchandise and new-crop corn entering the commercial circuit. In soybeans, we estimate sales of 2.5 million tons of available old crop and 8.5 million tons of new soybeans to be harvested in the coming weeks. At current FOB market prices, these 11 million tons of sales are equivalent to $6.25 billion. If so, soybeans would contribute 84% of all foreign currency received, and the remaining 16% would come from corn. Many These sales are produced to cover harvest commitments, payment of agricultural cards and cover checksand not so much for the $300 soybean-dollar incentive.
For the third quarter, July-August-September, we expect foreign exchange inflows of $2,384 million. In this case, the producer would sell 4.3 million tons of corn and 2 million tons of soybeans. In this third quarter, the August PASO result could influence surprisingly in the manufacturer’s sales decisions.
For the fourth quarter – October, November and December – we expect the lowest foreign exchange income in all recent history: 850 million dollars. With a steep drop for November, when they hit $250 million, and a much steeper drop for December, when they hit $100 million.
The problem the government will suffer from July when the inflow of foreign exchange plummets until December 10th.
We said in our January note: “The decline in foreign exchange inflows in the first half will be influenced by the massive sale of soybeans in the last four months of 2022, a fact that will impact the lower supply of soybeans available in the first months of 2023, due to lower acreage under early maize and yield and production losses of maize and soybeans due to the direct effect of drought.”
If this new foreign exchange earnings projection is confirmed in the July-December semester, the producers they would have in their possession as of December 11 grains equivalent to 14,000 million dollars. A true symbol and a clear message for the next president who will govern Argentina from the first day of his mandate.
The elements under analysis
In our new analysis and projection of foreign currency earnings for the next three quarters, we have taking into account the main objective variables and subjective variables.
Objective Variables: Future price trends, potential soybean and corn supply volume available, crop evolution projections, and estimated farmer sales based on harvest volume are included here for analysis. Harvest payment commitments, exchange plans, deferred checks and field cards.
serve as a reminder the good results obtained in terms of foreign exchange earnings when soybean I was implemented last September and soybean II in December. In the former case, producers sold US$8.120 million equivalent of soybeans and other grains, and producers’ sales in December represented foreign exchange income of US$3.7 billion.
We ask ourselves on this occasion, what can we expect from the producer’s attitude and willingness to sell his soybeans from the new program that guarantees an exchange rate of $300 to the dollar. First of all, let’s point it out the circumstances, between what happened in the last quarter of 2022 and the current situation, are very different.
At that time, in 2022, the producer had just over 20 million tons, between the goods delivered to be processed and the soybeans available in its silos, for an equivalent of more than 11,000 million dollars. Today the producer has far fewer soybeans, as most have already been sold or priced in earlier versions of soybean dollars I and II.
Moreover there are two other new factors that may influence the producer’s attitude to sell soybeans now or wait later. The first was the drought that lasted and worsened during the summer months, key times when crops need rain. This didn’t happen. Instead, we are facing the hottest February and part of March in our history, provoking additional and irrecoverable yield losses for crops. We must add the two frosts that fell, one in mid-February and the other in early March, which dealt a severe blow to the hopes of many producers.
Subjective variables: Consider the microclimate generated by the fact that we are facing a presidential election year, with all that this entails, with a high dose of uncertainty. Since the gubernatorial elections are separate from the presidential elections, I pass them on August 13th and the general election on October 22nd. In all cases, markets and expectations will be very steep and very sensitive to politics and its consequences over the next 6 months.
THE loss in soybean production that could reach 20 million tonswas ratified by the Rosario Stock Exchange in its new estimate of 23 million tons, and partially rectified by the USDA (United States Department of Agriculture) in its report last week, when it reduced soybean production from Argentina from 44 million tons in 2022 to 27 million tons by 2023.
Due to the lower soybean harvest, the decline in grinding volume to the lowest level in the last 20 years. Brazil will be the world’s top exporter of soybean meal, ousting the throne from Argentina for 30 years. This is another reason why foreign exchange income during the second half will be the worst in many decades.
The other factor that can influence the producers’ sales decision is to be found on the part of available and future soybean price quotesjust look at the closing of the MATBA-ROFEX market, with a “carry” or rise of almost 50 dollars per ton between short future positions and long future positions.
What should the dollar price be for the producers to sell? Soy-dollar $350 or $400?
Source: Clarin
