Argentine Farmers Set to Unleash $8 Billion of Stored Crops

  • Leadership change may alter global supply of soybeans
  • Farmers seen boosting wheat acreage on Macri's victory

Argentine farmers will swiftly boost exports, increasing global supplies of wheat, corn and soybeans, as Sunday’s election of Mauricio Macri as president heralds the end of punitive export taxes and government regulations, according to growers and analysts.

The country’s farmers are ready to ship an estimated $8 billion in stored crops as soon as export taxes are lifted or reduced as Macri promised, according to five farmers, analysts and exporters interviewed after the election. Macri has also vowed to lift currency controls as soon as he takes office Dec. 10, a move that investors see leading to a devaluation of as much as 35 percent for the peso, which would further help farmers trying to sell abroad.

"I can’t wait to start sending to the port what I have stored," Dante Garcia, a farmer in the town of Carlos Tejedor, 428 kilometers (265 miles) west of Buenos Aires, said by telephone before the election result. "Freedom has arrived to end so many years of government interference in the market, which devastated us."

Farmers have stored about $8 billion of soybeans, according to Leonardo Sarquis, one of Macri’s agriculture advisers. They are hoarding as many as 22 million metric tons of the commodity, about one-third of last season’s record crop, according to Miguel Bein, the main economic adviser to presidential candidate Daniel Scioli, who conceded to Macri Sunday following a runoff vote between the two.

Soybean Amnesty

Macri is considering a 90-day window of no export taxes on soybeans in a bid to spur sales from stockpiled crops, two people with knowledge of the plan said Monday. The 90-day window is one of the proposals being discussed, said the second person aware of the plan. It is being discussed by Macri’s financial team and lacks backing from the agriculture team, as it may hurt oil crushers and exporters while benefiting producers and the Central Bank.

Argentine farmers have been holding back some of their crops in protest at the taxes and also the laborious process of obtaining export permits. The country has shipped $17.6 billion of grains and oilseeds abroad so far this year, the lowest for the period since 2009, according to exporters’ consortium data.

Silo Storage

"Farmers have been saving crops in silo bags since 2014, when the last devaluation happened, as a way of protecting their capital," said Gustavo Lopez, a crop analyst at Agritrend SA. "With a peso always threatened by over 20 percent inflation, grains and soybeans have become a currency for them and are only sold when they need capital."

Argentina devalued its currency by 17 percent in a two-day period in January 2014 in a bid to make farmers sell their crops. Argentine farmers store grains to hedge against inflation as they are paid in pesos at a dollar value by exporters such as Bunge Ltd. and Cargill Inc. A further depreciation means farmers would get even more pesos for crops valued in U.S. dollars.

Export sales will bolster Argentina’s central bank reserves, which tumbled to a nine-year low of about $26 billion before the election runoff.

Unregulated Crops

The wheat tax was implemented in 2006 by then-President Nestor Kirchner. His successor and wife, Cristina Fernandez de Kirchner, increased the government’s grip on farmers by raising levies to 23 percent and 25 percent on wheat and corn, respectively. The soybean tax was set even higher at 35 percent. Restrictions on export permits followed.

“We hope the new administration eliminates the hurdles imposed to free trade,” Alberto Rodriguez, president of CIARA-CEC, an exporters group, said in an e-mailed statement.

Soybean futures on the Chicago Board of Trade slumped to $8.45 1/4 a bushel on Monday, the lowest since March 2009, amid a broad retreat among commodities. The Bloomberg Commodity Index, a measure of returns on 22 raw materials, slid to the lowest since June 1999.

Since 2007, many farmers switched to unregulated crops such as barley to avoid the taxes. The 2015-16 wheat crop currently being harvested may be the smallest in three years, down 16 percent from a year earlier at 9.5 million metric tons, according to Argentina’s biggest grain bourse.

This season, farmers have planted 3.7 million hectares (9.1 million acres) of wheat, 31 percent less than the average in the years preceding the taxes, according to the INAI Institute. Lost wheat acreage will be recovered rapidly, according to Esteban Copati, chief analyst at the Buenos Aires Grain Exchange.

“I can see farmers harvesting a crop close to Argentina’s record of 16 million metric tons if Macri keeps his promises,” he said in a telephone interview.

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