Argentine Farmers Double Soy Stocks to Hedge Against Prices and Inflation

This year Argentina’s soybean stocks have reached 7.4 million tons, more than twice as large as last year’s 3.2 million tons, according to estimates from local grain exchanges and the Argentine Rural Society (SRA). The federal government estimates an even bigger stockpile of 10 million tons. The increase is being attributed to a 12% increase in production and with a record harvest expected this year farmers are thought to be holding onto their soy as a means to hedge against high inflation and low oilseed prices. A 33% drop in soybean prices from last year to US$354 per ton means many farmers are stockpiling to wait for higher prices.

The stockpiling comes despite government efforts to discourage hoarding. Government officials, including President Cristina Fernández de Kirchner, need farmers to sell their soy so that they can collect the 35% export tax on soybeans and collect much needed capital, after long-term conflict in New York court is making it difficult for Argentina to raise cash in the global bond market.

The Buenos Aires Herald reports that Ernesto Ambrosetti, chief economist at the SRA, which represents big farmers, says “The government is establishing norms to pressure farmers into selling faster. But considering the uncertainties that they are facing, they will not accelerate their sales, which are already brisk.”

Last week members of two organizations that unite the country’s largest farm lobbies, the Argentine Rural Society (SRA) and Coninagro and the Argentine Rural Confederations (CRA), held a three-day strike due to what Coninagro’s head called “the critical situation of producers.” In response, the federal government has developed a plan that would benefit approximately 70% of Argentina’s farmers, mostly small and medium, by giving back at least half the export taxes charged by the government.