Peso Rout Turns Argentine Soy Hoarders Into Sellers

Argentine farmers who hoarded an estimated $4 billion of soybeans are stepping up sales on expectation the peso’s biggest slump in 12 years is over.

Producers more than tripled soybean and grain sales to exporters from Bunge Ltd. to Cargill Inc. last week from the previous week, the exporters’ association said. After the currency plunged to a record on Jan. 30 and then stabilized, farmers shifted strategy as they can earn more pesos for their crops sold in dollars. They’re also anticipating prices for the oilseed to decline, according to growers including Luis Firpo.

“There’s a small window of opportunity to sell,” Firpo, who grows soybean, wheat and corn in Santa Fe province, said by telephone from his ranch. “People are selling. Nobody wants to hold on to the soy until the end. We all know that in this country, the window can close at any time.”

President Cristina Fernandez de Kirchner’s government is counting on exports to rebuild dwindling hard-currency reserves, shore up a faltering economy and stem inflation that soared to 28 percent in 2013 in the South American country, the biggest producer of the oilseed after the U.S. and Brazil. Soybeans are used in everything from tofu and cooking oil to livestock feed.

Argentine growers sold $419 million of soybeans and grain in the first week of February, up 284 percent on the prior week, exporters group Ciara-Cec said in an e-mailed report Feb. 10. The peso fell to as low as 8.2435 per dollar on Jan. 23 and has been little changed in recent days, closing yesterday at 7.8013, down about 12 percent from Jan. 21 before the devaluation.

Weaker Peso

The central bank scaled back support for the peso last month in a bid to preserve international reserves that fell to a seven-year low. This year, the peso has weakened about 16 percent against the U.S. dollar, more than any major currency.

Locked out of international debt markets since its $95 billion default in 2001, Argentina depends on central bank funds to pay debt and finance government spending.

The government’s move to boost exports is attracting farmers to offload soybeans, 4.6 million tons of which haven’t been sold yet, according to Ernesto Ambrosetti, chief economist at the Rural Society, Argentina’s largest farming group. The government gets 35 percent tax on soy exports.

Attractive Prices

“Last week there was a lot of sales, mainly because of the attractive prices on the spot market and because of the favorable exchange rate, but also because of eagerness to pay for goods ahead of next season,” Ambrosetti said in a phone interview from Buenos Aires. “This week has been calmer on relative terms, with expectations to see what will happen.”

A further depreciation means farmers would get even more pesos for crops valued in U.S. dollars. Argentine farmers store grains to hedge against inflation as they are paid in pesos at a dollar value by exporters such as Bunge and Cargill.

“When farmers are not sure about what tomorrow brings they typically hold onto to their grain,” Bunge Chief Executive Officer Soren Schroder said in an interview today. “Although, we do believe farmers will have to market some portion of their very large crop. From the middle of March to June we will see a normal flow of soybeans and corn into the marketplace from Argentina.”

The Buenos Aires Grains Exchange reiterated on Feb. 6 a soybean forecast of 53 million metric tons. It said all of the record 20.8 million hectares had been sowed. Production may be 54 million tons, the USDA’s Foreign Agricultural Service said in a report the same day. Both estimates expect the country will exceed a 2008-09 record soybean crop of 52.7 million tons, Argentina’s Agriculture Ministry has said.

Soybean futures for May delivery gained 1.1 percent to $13.2425 a bushel. Exports in the week of Feb. 6 reached 173,644 tons, capping a 25 percent gain for the four-week average compared with a year earlier, the USDA said.

Before it's here, it's on the Bloomberg Terminal.