Export from campaigns: how to get more than 10,000 million dollars in a few months

Of

Pablo Adriani

agricultural consultant

We are facing the highest, record, foreign exchange income in all history contributed by the agricultural sector. In the period January-May 2022, exporting and agri-food companies totaled $ 15.33 billion in revenue, an increase of 15% compared to 2021 ($ 13.3 billion) and 120% compared to 2020 (6,963 Millions of dollars). There is no history of such an increase in foreign exchange earningsand it has to do with the sharp increase in international prices and the record volume of sales in the first five months of the year by producers, mainly of wheat and maize.

Producers have already sold 20.4 million tons of wheat, of which 17.4 million were purchased by exporters and 3 million by mills. Equilibrium the exportable grain is already covered if we consider the DJVE already registered. But if we consider the level of declared grain stocks and the estimated volume in the hands of producers, we are faced a harvest that could reach 22 million tons. In this case there would be at least 1.5 million more tons of grain that can be applied to new export activities.

In the case of maize the producers have already exported 27 million tons, the DJVE of maize reaches 27.2 million, consequently all sales are already recorded and the maize purchased. Having an exportable balance of corn of 37 million tons, there are still 10 million tons that can be declared on sale. Here it is the government’s responsibility to make corn sales records more flexible or free, without the current conditions restricting exporters from generating new overseas sales.

However, with the highest currency earnings in history, Central bank reserves fail to recoveras foreign currency outflows from imports increased much more than foreign currency inflows from exports.

The infographic shows that in the first quarter of 2022, foreign exchange earnings hit a record $ 27,681 million, an increase of $ 6,131 million or 28% over the same period in 2021, when it amounted to $ 21,550 million. dollars.

In the case of imports, they increased by $ 7.303 million, from $ 17,549 million in 2021 to $ 24,852 million this year. 42% more than in the first quarter.

The fact that we need to highlight is the change in the negative trade balance of 29%in the first quarter it was 2,829 million dollars against 4,000 million dollars, a decrease of 1,172 million dollars.

Trying to find some of the reasons for the decline in the trade balance, we can highlight this fuel imports they had an increase of 2,010 million dollars or 195% between 2021, with imports of 1,030 million dollars and the same period of 2022, with 3,040 million dollars.

A first conclusion leads us to think so the increase in fuel imports for 2,010 million dollars was the direct cause of the decrease of 1,172 million dollars that was recorded in the trade balance during the first quarter of this year.

Looking for arguments or culprits, as the president of the central bank did this week, accusing producers of withholding soybeans worth $ 2.5 billion is not knowing how to interpret how markets work and how the producer behaves. In the same way as to consider that exporters are withholding the foreign exchange payment for that soy that the producer holds and does not sell, is not to know that the exporter is satisfied only when the producer sells his cereals.

If we take the DJVE published on the website of the Ministry of Agriculture, where the registered sales product by product appear for all the months of 2022, we can see that starting from 22 June there would be a sharp decline in foreign exchange earnings if we projected the next half year. However, this is not entirely true, as foreign sales declarations are a very dynamic process that takes place on a day-to-day basis, and can change depending on market circumstances and the manufacturer’s willingness to sell how much and when of what’s left. of its harvest.

However, given the sales model of the producers of this campaign, we are able to anticipate it we could be facing the worst semester of currency settlement in recent years.

Anticipating that this may happen, we have compiled below a list of actions that it could be implemented by the governmentwith the aim of creating a better business environment and inducing the players in the sector to place a greater volume of cereals on the market.

This it does not mean that such measures have direct and immediate effects on market participants. We know that if the government takes no action, it will have to be prepared for one of the lowest currency liquidation periods in recent history.

Some of the ideas the government can implement:

Grain: enable new export records for 1.5 million tons. It would increase foreign exchange income by $ 674 million.

Corn– Enable new records or make them more flexible for 8 million tons. Foreign exchange earnings would increase by $ 2,488 million.

Soy complex: temporarily lower withholdings (until December 30) by 5 percentage points, bring withholding taxes on soybean oil and flour exports to 28%. Or provide some advantage that allows the producer to get a better price for their soybeans. This would allow the oil industry to increase its purchasing power by US $ 30 per tonne, a benefit that would go directly to the producer and motivate it to sell part of its production it holds in its silos. With this measure it could generate $ 7.3 billion in foreign currency.

the possible market reactions to these three measures reflected in the “Foreign Exchange Income Projection” infographic, the solid line reflects the greater volume that exporters will be able to enter if producers trust the government measures, while the dotted line reflects the DJVE posted on the Minagri website. The difference in the highest exchange income between one hypothesis and another, according to these measures, is displayed in the vertical lines. In this case, the official DJVE as we have indicated in the previous paragraphs, it is the photo to date, the real dynamics of the new records have daily variations, that is to say that the current photography can improve, but not enough to bring tranquility to the reserves which the Central Bank needs, if the government does not intervene.

The government has the key that can help release foreign exchange receipts totaling $ 10,462 million in the second semester July-December. This requires a certain amount of audacity, confidence and decision-making when circumstances warrant it, as in this case preventing the worst semester of currency liquidation in history and putting the commitment and agreement with the IMF at risk.