Argentine farmers' soy hoarding to keep growing

Argentina's highly-contested soybean stocks figure may not be as high as the US Department of Agriculture believes, but is still high equivalent to twice America's own and set to rise further next season.

USDA staff in Buenos Aires questioned the department's official estimate that Argentina will be left with 9.37m tonnes of soybeans at the end of the 2012-13 season which has actually only just finished for the country seeing it at 8.64m tonnes.

However, even that estimate is viewed in Argentina itself as elevated, the bureau said.

 "Most contacts do not agree with this number, indicating it is too high," with the consensus at 5m-6m tonnes, equivalent to 2m-3m tonnes "above an average year".

However, while this consensus figure "sounds reasonable, the numbers do not add up", the bureau said.

'More and more incentive'

Argentina's farmers are widely seen as hoarding their harvests as a hedge against inflation, with crops offering dollar-denominated security against peso depreciation.

"Over the last few years, producers have had more and more incentive to hold on farm stocks year after year as physical assets, instead of selling the commodity and depositing the money in a bank," the bureau said.

"After the financial crisis in 2001, when there was a freeze on bank accounts and people were not allowed to withdraw from their own accounts, producers began investing their money in anything but untrustworthy bank accounts.

"It does not make sense to sell a large quantity when inflation is estimated over 30% and the peso is unstable."

And soybeans are particularly favoured for hoarding, given their ready market, with Argentina the top exporter of soyoil and soybeans, while the country operates export controls over wheat, a factor viewed as limiting price prospects.

'No limit to storage capacity'

However, getting a handle on the size of the stocks has proven difficult.

"Some producers will say there is nothing, and when driving through the heart of soybean country, there are very few silo bags therefore validating this theory," the bureau said.

But working on data from last year's harvest, broadly seen as exceeding 49m tonnes, exports of 7.9m tonnes and a crush of 35.5m tonnes imply significant supplies left unaccounted for.

And the number looks set to keep on increasing.

The bureau said it "anticipates that more stocks to be held each year", highlighting the widespread use of silo bags, which can store up to 250 tonnes of grain.

"Essentially, there is no limit to storage capacity when including silo bags."

Stocks will end the newly-started 2013-14 season at 11.6m tonnes, and hit 14.1m tonnes by the end of 2014-15, equivalent to one-quarter of the harvest.

Best margins

The bureau's comments follow an estimate from Michael Cordonnier, the respected crop scout, that as of March Argentine farmers were still holding onto 5m tonnes of last year's soybean crop.

In December, Argentine newspaper Cronista Commercial estimated that Argentine soybean farmers were holding 11.5m tonnes of soybeans.

The bureau's estimates for 2013-14 are based on a forecast for production of 54.0m tonnes, in line with the USDA's official forecast, and for next year of a 57.5m-tonne crop.

"Soybeans continue to be the 'safe' and 'easy' crop," it said.

"Input costs for soybeans are lower than for other commodities - it costs more than twice as much to produce corn that it does to produce soybeans.

"Furthermore, the margins for first crop soybeans are higher than any other crop grown in Argentina."

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