“It’s soy, stupid”, Sergio Massa’s letter to the world

Beyond the dust that raised the implementation of the “Dollar-soybeans”announced last Sunday by the Minister of Economy, Sergio Massa, a few hours before leaving for the United States, what is concrete is that the government has achieved its goal: that producers get rid of the precious commodity, activating the flow of foreign exchange.

The “piletazo” unmasked the anguish in the face of the critical situation of the reserves. In addition to exceeding the limit by international financial organizations, Mass needed shows that he had some ability to find resources in the local market. This is what the interlocutors would have asked him with certainty.

The dollar of 200 pesos, against the 140 of the last week of August, meant an improvement of 40%, which moved linearly on the price.. And then a strong selling current began, which allowed the government to quickly reach the billion dollars that had been proposed as a target for the first week of the experiment. There was also a sense that, at this rate, it would not be impossible for him to reach $ 5 billion in the entire month of September.

with those credentials, it wasn’t magic the reaction, for example, of the IDBwhose owner rejoiced with Massa e offered 3 billion dollars without compensation in works, just to bolster reserves. Clinton yelled, “It’s soybeans, stupid.”

It is worth remembering in October this cousin disappears on the official dollar.

Naturally, this avalanche of sales has had an impact on the markets. Argentina is an important player in the global soybean market, particularly in value-added derivatives (flour and oil). Prices in Chicago increased in August, inter alia due to the decline in supply in Argentina. Monday was a public holiday in the US and the markets didn’t work, but on Tuesday the impact was strongly felt. Prices dropped 10%. There it is, at the end of this comment. But specifically, producers have gone from 52,000 to around 70,000 pesos per ton. Today 35% less soy is needed to purchase an investment or input good for the next campaign Many are taking advantage of the ballad.

On the other hand, the creative idea of reversible devaluation has an additional dressing. Sergio Massa said that raising the dollar to 200 had the same effect as eliminating the 3% withholding tax. This is only in appearance. The reality is that the withholdings are maintained, and consequently the state will collect 33% of the exchange rate improvement. In numbers, if before he held 24 thousand pesos, now captures 34,000 pesos per ton of soybeans. Which also remain in the country because export rights are not shared. Transfer from the provinces to the social movementswhich is the destination of these resources, according to Massa himself.

There is also complications and negative externalities. The leases, for example, they are a complication. It is a question between the parties, which is resolved in the negotiation. And here the long-term interests of the tenant and the landlord take precedence. There will be a bit of a sizzle but you always find a way around it.

Among the negative externalities is the impact on segments of the business that depend on soy products. Breeding of poultry, pigs, dairies, feed. The same goes for the manufacturers of biodiesel, which use soybean oil as an input. This sector is confined between the price of the raw material and the price set by the Secretary of Energy for biofuels. The question is whether it is a cyclical impact, e what will happen at the end of September.

What cannot be denied, beyond all the consequences that must be taken, is that now everyone knows a little more about the importance of soy agribusiness in the economy. Therefore, it would be advisable to operate more on future flows than on past securities. that have already sounded.