Argentine debt could pressure soybean prices
Argentine farmers say they will stockpile soybeans in the second half of the year if the government is unable to cut a deal with debt investors to stave off a new sovereign default, and the increased hoarding will likely push world food prices higher.
Many producers are already holding soy back from the market as a hedge against high inflation and say they will be even more cautious as negotiations between the government and "holdout" bond investors go down to the wire.
If Argentina’s government cannot by the end of July reach a deal with the creditors who declined to participate in restructurings held in 2005 and 2010, it will default again.
The next coupon payment on Argentina’s restructured debt is due Sept. 30. The government on Thursday tried to transfer the payment to bondholders. But the transfer was blocked by a U.S. judge until Argentina hashes out a deal with the holdout creditors, giving it just a 30-day grace period to settle.
The holdouts want full repayment on bonds that Argentina defaulted on in 2002 and they have won a string of victories in U.S. courts that put the country on the brink of a new default.
Soybean price pressure possible
"Considering what's going on with Argentina’s debt, we are holding onto what we've harvested this year, to see what happens," said Carlos Novecourt, who runs a small farm in the town of Carlos Casares, in Buenos Aires province.
The resulting cut in Argentine oilseed supply would put upward pressure on world soybean and soymeal prices at a time of rising demand, particularly from China.
Argentina is the world's No.3 soybean exporter and top supplier of soymeal needed in countries where diets are shifting away from rice and toward meal-fed beef, pork and poultry.
Signs of the supply uncertainty are already emerging in the global market as soymeal exports from the United States, the world's No.3 supplier, are shattering records.
Argentina is expected to harvest 55.5 million tonnes of beans this season, according to the Buenos Aires Grains Exchange, which said on Thursday that growers had collected 95 percent of the harvest so far.
Over the next two months, Argentine growers will sell beans to raise cash needed to pay off the loans that financed planting. Once the bank loans are paid, however, growers will have even more reason to pile up grain reserves on the farm.
"After late August, Argentine farmers will hold onto 23.25 million tonnes of soy, with a market value of $12 billion. Under normal circumstances, which is to say without the debt restructuring problem, that amount would be 18 million tonnes, worth $9.3 billion," farm analyst Pablo Adreani said.
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