Argentina's state bank has moved to bolster the country's reserves by reducing credit to soy farmers holding onto an estimated 8 million tonnes of last year's beans as a hedge against one of the world's highest inflation rates.
Government-controlled Banco Nacion has told its branches in the Pampas farm belt to stop financing growers who are denting tax revenue by hoarding soybeans. Argentina is the No. 3 exporter of beans and the top supplier soymeal feed used to fatten up cattle and other livestock around the world.
If the credit crackdown works and farmers are forced to sell, there will be an increase in Argentine supply as the year ends. More soybean selling would let the government collect more of the 35 percent tax that it puts on exports.
The country's main farm group says that of the 12.9 million tonnes of soybeans being held back from the market, 8 million will be swapped for seeds, fertilizers and other inputs.
With inflation estimated at about 40 percent, soybeans have replaced the local peso as a unit of value.
"The government's desperation for foreign exchange is growing, but the amount of soybeans sold by farmers is the same now as it was at this point last year," he said.
Banco Nacion did not respond to requests for comment. It finances about 40 percent of Argentina's agricultural production, according to private estimates, amounting to $300 million in credits to soy growers.
"Tell clients that financing from the bank will only be made available to those farms that show they are not holding onto soybeans," said an internal Banco Nacion memo provided to Reuters by a farm industry source who requested anonymity.
The credit crackdown comes at a time of declining investment in Latin America's No. 3 economy due to government policies such as currency and trade controls, as well as fluctuating corn and wheat export limits that make crop planning difficult.
Despite a recent uptick when the government tightened currency controls to support the peso, central bank reserves have fallen 6 percent to $28.9 billion this year.