Argentine farmers are slowly starting to sell their soy and corn stockpiles now that newly elected President Mauricio Macri has devalued the currency and needs export dollars to help rev up central bank reserves left thin by the previous government.
Macri on Thursday lifted currency controls that had been in place since 2011, letting the peso devalue by 26.55 percent against the US dollar in a bid to boost exports and jump-start the economy.
Growers on the vast Pampas farm belt will now get more pesos for every dollar that export companies turn over to the central bank. Farmers hoarded crops while waiting for the devaluation. "I'm selling the rest of soybeans that I have in stock. The price is right and I have to pay many inputs and costs," said Santiago del Solar, who farms thousands of hectares in the bread-basket province of Buenos Aires.
Those not in need of fast cash may wait longer to see where the exchange rate settles before selling. Indeed transactions nationwide had increased by just a trickle as of Friday. "It's still too early to see a massive response," said independent grains analyst Pablo Adreani. Guillermo Rossi, an analyst with the Rosario grains exchange, said that while confidence among farmers has increased, the initial reaction to the devaluation was cautious. "We expect selling to pick up substantially over the coming weeks, once there is less uncertainty about the exchange rate," Rossi said. He forecasts 8 to 10 million tonnes of soybeans will hit the market over the coming three months.
The government has a deal with exporters to liquidate $400 million of produce per day over the weeks ahead, to help bolster central bank reserves depleted by years of free-spending populism under previous President Cristina Fernandez. There are six to 10 million tonnes of corn piled up on the Pampas, ready to be liquidated, said Martin Fraguio, head of corn industry chamber Maizar.
"We have a historically high carryover stock of corn that accumulated not due to hoarding, but because exports quotas were smaller than what they could have been," Fraguio said. Fernandez curbed wheat and corn exports through a quota system that Macri, elected last month and inaugurated last week, vows to get rid of. He has already eliminated the taxes that Fernandez slapped on international wheat and corn shipments.
"Thanks to the devaluation all costs that are not linked to internationally traded goods will decrease, increasing profit margins of all crops," Fraguio said. Farm groups says about 13 million tonnes of soybeans are also stockpiled, and expected to be liquidated before the next harvest in April and May.