South America has been a special part of my life for four decades. I have lived many years in Brasil and Peru. I am married to an incredible lady from Argentina. I want to share South America with you.
Argentina’s soyabean “stocks bubble” is about to burst as the country’s farmers are set to sell their crops to support their dwindling incomes.
The country’s farmers have long used their crop, priced in US dollars, as a bufferagainst rising inflation and a falling local currency. However, “currency devaluation pressure, farmer indebtedness, and a surging industry demand”, will lead to inventory sales, said the latest report from the US Department of Agriculture’s Buenos Aires agricultural attache.
FirstFT is our new essential daily email briefing of the best stories from across the web
“Producers, crushers, and the government can only play the game of chicken so long before someone will have to cave,” it added.
Argentina is the world’s third-largest grower of the oilseed, producing 56m tonnes, a little more half of US output, and in the past few years, the “selling strike” by farmers has affected global companies such as ADM,Bunge, Cargill and Glencore.
The crop can be stored for several years and inventories in Argentina have soared. At the start of the 2014-15 crop year, soyabean inventories totalled 18.6m tonnes, almost doubling from the year before, according to USDA data. Sales of the plastic silo bags Argentina’s farmers use to store their soyabeans have also rocketed.
The government, frustrated by the fall in taxes from soyabean exports, has tried to restrict the sale of the bags by creating new reporting requirements for silo bag manufacturers and vendors.
The AFIP, the tax agency, is now keeping a registry of how many silo bags the industry is manufacturing and selling, as well as who is buying how many of the bags.
The AFIP has decried soyabean producers’ “speculatory use of silo bags that disrupts the market and keeps much-needed funds from entering the country”, according to the USDA report.
Cases of vandalism against the soyabean farmers have risen during the past few months. In the six months to February this year, there have been some 50 incidents of silo bags being deliberately cut open by intruders and farmers forced to sell their crops.
Selling by Argentina’s farmers will bring more soyabeans on to an already oversupplied market. CBOT soyabeans have fallen 4.5 per cent from the start of the year, and 36 per cent from a year ago. Soya meal, which is used for livestock feed, has declined 12 per cent in the year to date and 35 per cent since April 2014.
More than three-quarters of soyabean production in Argentina is processed domestically and crushed for meal and oil. The country is the world’s leading producer of soyabean meal and oil.