Grains powerhouse Argentina will jump-start soy exports over the weeks ahead as farmers, who have hoarded beans to protect themselves from the weakening peso and galloping inflation, are forced to sell by the time harvesting starts in March.
The country is the world's No. 3 soybean exporter and top supplier of soymeal at a time of booming Chinese demand.
A wobbly currency and fast-rising consumer prices have prompted growers to save in soybeans rather than in pesos, drying up Argentine supply and providing a boon to U.S. exporters.
The official exchange rate is 18.5 percent weaker this month while the black market peso has slumped 22.5 percent. The Rosario soy market has virtually shut down in recent weeks as growers pile up beans on their farms to protect themselves from inflation fueled in part by the anemic peso.
With the March-May soy harvesting season approaching, farmers say they will be forced to re-start selling.
"You have structural expenses on any farm, so at some point you just have to sell your reserves," said Alexis de Noailles, a grower in the bread-basket province of Buenos Aires.
"Most of us pay income taxes around March, for example, and they cannot be paid in soybeans," he said. "And you wouldn't want to wait until the last minute to sell your soybeans because there is a lot of soy in the world this year and the closer we get to March the lower prices are likely to be."
A resumption of farmer selling is expected once the harvest begins, but has not yet been fully priced into the futures market, said Rich Nelson, chief strategist with agricultural trade consultancy Allendale Inc.
March futures on the Chicago Board of Trade may fall to $12.50 a bushel by mid-February, about 17 cents below levels today, and July futures may sink to $11.75 a bushel by the peak of harvest, down about 65 cents from today, as export volumes from both Argentina and Brazil increase, he said.
Argentina's upcoming soy crop is seen at 53.0 million tonnes, up from 48.5 million in the previous season, according to the Buenos Aires Grains Exchange.
"The local soybean market will come back to life when the harvest starts coming in. Farmers will need to sell 20 percent of their 2014 soy crop to pay production costs that cannot be bartered for in beans," said farm consultant Pablo Adreani.
"You will see at least 11 million tonnes of new soybeans hit the market between now and May," he said.
Over the months ahead big harvests are also expected in Brazil (89.0 million tonnes) and Paraguay (9.4 million), according to the U.S. Department of Agriculture and private analysts. Demand is driven by China, where beans are crushed into cattle feed for the country's fast-growing beef industry.
Despite huge investments made by exporters in Argentine soymeal plants, idle capacity at the facilities is approaching 50 percent as growers pile beans into white, vacuum-packed plastic bags that serve as horizontal silos dotting the Pampas.
"They see soybeans as a kind of currency now, like the dollar or the euro, which represent a more reliable store of value than the peso," said Leandro Pierbattisti, an analyst with Argentina's grains warehousing chamber.
It is not only the farm sector that is feeling the pinch.
Years of erratic policymaking in Argentina have created a gnarl of capital and price controls that have made simple transactions - like buying a refrigerator - impossible, as merchants are unsure what prices to charge.
"The fact that the economic team does not seem to have a comprehensive strategy, especially to deal with reducing fiscal spending, is likely to hurt the efforts to stem the decline in reserves and lower inflation," said a recent note from the Eurasia Group consultancy.
EIGHT IS ENOUGH
Economy Minister Axel Kicillof - who engineered the 2012 nationalization of Argentina's top oil company, YPF - has warned merchants not to hike prices. He has hinted that the government will use central bank reserves to intervene in the foreign exchange market to keep the peso at 8 to the dollar, a level he calls "adequate."
Central bank reserves fell 29 percent last year to $31 billion. They stand at under $29 billion after the bank burned through $420 million over the last four days to hold the official peso at 8 per dollar.
Inflation is meanwhile likely to keep climbing, due in part to generous state energy and transportation subsidies at the heart of President Cristina Fernandez's populist policy model.
Her policies, like high soybean export taxes and curbs on corn and wheat shipments aimed at ensuring ample domestic food supplies, tend to take money from sparsely-populated farm areas with crumbling infrastructure and funnel it toward her base in the vote-heavy suburbs surrounding capital city Buenos Aires.
She easily won re-election in 2011 and the race to replace her next year is wide open. Opposition candidates bet that discontent over the consequences Fernandez's policies will pave the way for voters to embrace a more pro-investment candidate in the 2015 election. She is banned by law from running again.
Meanwhile, farmers like Alberto Pereyra in Buenos Aires province say they are preparing to take their soybeans back to market as costs mount and alternative financing runs dry.
"You can hoard crops as long as you have the financing to keep planting and producing," he said. "That's going to run out for most of us before March."