Argentina’s ‘soybean dollar’ has implications for Brazil, but should be limited

Foreign media, September 12 news: Last week, Argentina announced the implementation of a preferential exchange rate for soybeans in September, which promoted a surge in Argentine soybean sales, resulting in the weakening of Brazil’s soybean competitiveness and the downward pressure on the export premium of Brazilian products.

Analysts said these effects should not last long, considering that Argentina’s “soybean dollar” exchange rate only took effect in September to boost foreign exchange reserves.

Before last week, Argentine farmers were reluctant to sell soybeans, which they saw as hard currency to hedge against economic uncertainty and the devaluation of the peso. But with the introduction of a preferential exchange rate of 200 pesos per dollar from September 5, Argentine soybean trading volumes were almost five times higher than the previous week.

Daniel Squeira, an analyst at consultancy AgRural, said the market was already feeling the pressure, with Chicago soybean futures and export premiums for Brazilian soybeans and manufactured products under pressure. FOB prices for Brazilian soybeans fell to $609 a tonne from $621 a ton.

However, since the U.S. market was closed last Monday and Brazil was closed on Wednesday, it is difficult to assess the impact on Brazil’s soybean export business, and the situation is expected to become clearer this week. Argentina is expected to steal some business from Brazil as Argentine farmers accelerate sales.

Carlos Cogo, managing partner of consulting firm Cogo, said the Argentine government’s incentives could lead to farmers selling previously hoarded stocks, thereby increasing the global spot supply of soybeans.

As of August 31, farmers in Argentina had sold 52.3 percent of their 2021/22 soybean output of 44 million tonnes, compared with 62.8 percent a year earlier, when production was 46 million tonnes, official data showed. The soybeans sold by Argentine farmers will be used for domestic crushing as well as whole beans for export, Koge said. Accelerating soybean sales in Argentina may have only a short- and medium-term impact.

The situation will get worse in the short term (Brazil), but he believes the loss of Brazil’s competitiveness is limited. It is not known how long this measure will last. If it’s only September, the impact will be temporary. In addition, Brazilian soybeans are nearing the end of the export window, also minimizing the negative impact of increased Argentine sales. Brazil’s soybean exports from January to September are expected to be 71.1 million tons, of which this month’s exports are expected to be 3.9 million tons, according to shipment data from Brazil’s grain exporters association ANEC. This is close to Brazil’s National Commodities Supply Corporation (CONAB) export forecast for the full year 2022 of 77.2 million tonnes.