Argentina to restart soy exports as farmers forced to sell
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."
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