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Argentine farmers find it tricky to kick their silo bag habit

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Good news for makers of silo bags.

The farm-friendly regime brought in by Argentina's new government may not, after all, have heralded a collapse in use by farmers of the temporary crop storage containers.

Many forecast that, after the government Mauricio Macri cut crop export taxes as one of its first moves after being elected in December, that the move, coupled with peso devaluation, would spur farmers to give up their habit of stockpiling crops, mainly soybeans.

Hoarding crops - whose value is linked to dollar-denominated international markets – has represented a key means for farmers to avoid the threat of a weaker peso, and meant such huge sales of silo bags, which offer low-cost storage, that the previous government imposed reporting requirements on sales of the sacks.

However, the sausage-shaped bags looks set to remain in demand despite the change in government, US Department of Agriculture staff said, citing the prospect of a bumper 58.5m-tonne harvest, the second biggest on record.

'Temporary storage needed'

"If 2015-16 output reaches the forecast level, Argentine farmers will likely have to increase temporary on-farm storage capacity prior to the delivery of the crop to processing or export facilities," the USDA officials said.

"One way to achieve this is through the use of the silo bolsa… a popular method of storing grain in Argentina."

The bags typically hold 60-250 tonnes of grain each, and can, according to USDA staff, store soybeans for approximately three years, with likely losses of about 2-3%.

Hoarding still active?

Prospects for Argentina's soybean harvest have been helped by recent rainfall which, while causing flooding in some areas, "has improved water supply at a key moment" for the crop, the Buenos Aires grains exchange said in a report overnight.

The exchange, flagging "generally positive" soil moisture profiles for soybean crops, kept at 58.0m tonnes its forecast for the forthcoming harvest.

However, the need for silos bags may also be being enhanced by a reluctance of farmers to sell their stockpiled soybeans despite government reforms, with the cut to the export tax on the oilseed a modest 5 points, to 30%.

Archer Daniels Midland, which has estimated the Argentine soybean hoard at about 12m tonnes, said last month that farmer selling of soybeans had been "disappointing", and below market expectations.

"The farmer maybe was not that happy with that reduction" in the soybean export levy, said Juan Luciano, the ADM chief executive, who was raised in Argentina.

By Mike Verdin

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