Argentine soy market paralyzed as farmers hoard beans
Argentine soybean farmers are registering their lack of faith in the country's peso currency by hoarding beans even as the local futures market shows a clear drop in the price of the oilseed for delivery in the months ahead.
Argentina is the world's top exporter of soymeal and soyoil as well as its third biggest soybean and corn supplier at a time of booming international food demand. But for local farmers, a bean in the bag is better than a peso in the bank, as confidence declines in Latin America's No. 3 economy.
President Cristina Fernandez's policies, from harsh currency controls to heavy stimulus spending unencumbered by inflation targeting, has made Argentina a no-go zone for all but the most risk-hungry investors.
The spot price of soy in grains hub Rosario is $325 per tonne, way above the $288 for beans to be delivered in May.
Growers are nonetheless hoarding their stocks because, as low as prices may go this year due to heavy global supply, to sell would expose them to a currency ground down by high inflation, falling central bank reserves, and a lack of investor confidence.
"Normally, you would want to sell now at $325," said Leandro Pierbattisti, an analyst with Argentina's grains warehousing chamber. "But the market in Argentina is not normal because of the devaluation of the peso."
Argentina's black market peso has weakened 37 percent over the last year to 11.85 per U.S. dollar at the end of trade on Tuesday, 72 percent weaker than the official exchange rate.
The Fernandez administration has cracked down on access to U.S. dollars, forcing farmers to save in anemic pesos. This has all but dried up the local soybean market in recent weeks.
Pierbattisti estimates that Argentine farmers are holding onto about 8.4 million tonnes of soybeans, up from an estimated 1.6 million at this point last year.
Local factories that crush soybeans into meal and oil, used as livestock feed and in making biofuels, are working at 60 percent capacity, down from 65 percent a year ago, due to lower supply of raw beans as farmers hoard crops, Pierbattisti said.
"Farmers are not selling a single kilo of anything," said a Buenos Aires-based grains trader who asked not to be named. "There is no real commerce."
Growers are paid for their grains in pesos, which they are not allowed to swap for dollars under Argentina's foreign exchange rules. Lack of access to a stable currency has encouraged growers to pile beans into oblong white plastic bags that have come to dot the Pampas grains belt, each horizontal silo representing a makeshift unit of savings.
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