Argentine soy market paralyzed as farmers hoard beans
Export companies that sell Argentine soybeans overseas are paid in U.S. dollars. But they are required by Argentina to repatriate the greenbacks to be swapped for pesos at the official exchange rate.
Trucks For Raw Beans
This season's U.S. soybean harvest may be one of the largest ever at 89.5 million tonnes. So the world is likely to be awash in soy by the time South American growers start bringing in their crops next month.
Big harvests are expected in Brazil (89.0 million tonnes), Argentina (54.5 million) and Paraguay (9.4 million), according to estimates by the U.S. Departtment of Agriculture and private analysts. Demand is driven by China, where soymeal is needed to fatten up cattle served as beef steak to increasingly discerning middle class diners.
Argentina's interventionist policies, including a 35 percent export tax on soybeans and the 2012 nationalization of the country's main energy company, YPF, have joined with high inflation to scare off investment needed to take advantage of growing world food demand.
Private economists, rejecting official government data as lacking credibility, say consumer prices rose by more than 25 percent last year, one of the world's highest rates. The government said full-year 2013 inflation was 10.9 percent.
Consumer prices will rise about 30 percent in 2014, according to a Reuters poll of analysts last week. That would be the highest rate since 2002 when millions of middle class Argentines were pushed into poverty by a crisis punctuated by a sovereign bond default and 41 percent inflation.
"We feel safer holding onto our crops than we would holding the peso," said Santiago del Solar, who manages thousands of hectares in western Buenos Aires province. "That's not going to change as long as confidence remains so low, or until there is a change in policy that would allow us to save in dollars."
With two years to go before the end of her second term, Fernandez has shown no sign of making major policy changes.
Buenos Aires farmer Alvaro Tomas says he and his neighbors are meanwhile using raw beans to buy everything from pickup trucks to seeds. A good four-wheel-drive vehicle, for example, would cost you about 130 tonnes of beans.
"Any grower who has the alternative to save in soybeans is doing so because it the only way to protect yourself from inflation," Tomas said. "I don't know anyone who can save in any other way."
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