Argentine farmers' reluctance to sell soybeans, blamed for
paralysing trading on the Rosario grains exchange, looks set to continue,
thanks to the continuing decline in the peso - and to the spread of silo bags.
Growers in Argentina, the third-ranked producer of the
oilseed, are sitting on 11.5m tonnes of soybeans, according to newspaper
Cronista Commercial - equivalent to more than 20% of the latest harvest and more than the country usually exports - viewing
the crop as a hedge against rising inflation and a falling currency.
The peso this week fell below $0.16, a drop of 22% year on
year, and down by nearly one-half over the last five years.
Crops, being dollar denominated, offer growers protection
against currency decline, prompting the withholding, and lack of offers, which
has been blamed for five successive days without soybean trading on the Rosario
grains exchange, the country's main ags market.
'Very little being transacted'
"Farmers refused to sell their beans in light of the
unstable domestic currency," Vanessa Tan at broker Phillip Futures said.
At the Rosario exchange, a spokesperson told Agrimoney.com
that ideas that the weakening currency was to blame was a "fairly accurate
"Very little is being transacted, and one of the reasons is
that the dollar goes up day by day, so sellers prefer to wait a bit to get more
value in peso terms," the spokesperson said.
'I would not sell'
The extent of the withholding has raised concerns that
global soybean markets could face a flood of Argentine supplies as the country's
next harvest approaches, and farmers sell up to make room for the new crop.
However, that looks unlikely given the extensive use of silo
bags, large storage sacks, which can store crops for some 18 months, leaving
farmers a further nine months or so before they need to sell for fear of
quality deterioration, said respected crop scout Michael Cordonnier.
"The fear of inflation is much higher than the fear of losses
to deterioration," Dr Cordonnier, at Soybean and Corn Advisor, told
"Sure, you might suffer some discount from deterioration in
quality, but the risk of loss is far greater from a declining currency.
"If those were my soybeans, I would not sell," unless the
government devalued the currency, "when I would sell the next day".
The comments came despite a forecast by Dr Cordonnier, who
while based in the US has close connections with South America, that Argentina
will harvest a record 56m tonnes of soybeans this year, a figure higher than
the 54.5m tonnes at which the US Department of Agriculture pegs the crop.
However, he was more downbeat that the USDA on expectations
for Argentina's corn crop, which is forecasts at 24m tonnes, down some 10% year
on year, citing the impact of dryness in slowing plantings, and encouraging growers
to switch to soybeans instead.
"Sowing of more than half the corn crop was delayed into the
month of December, the most corn ever planted that late," he said.
While late planting need not mean a weak harvest, as the US
proved this year, "the weather is becoming more troubled going forward", with
ideas of dryness in some areas.
Weather service MDA said in a long-range forecast that "some
heat may become an issue in north western Argentina in January", although drier
weather in other parts would counter excessive wetness of late.