:format(webp)/cloudfront-us-east-1.images.arcpublishing.com/grupoclarin/D3FOH7VJUNCDNEI3MZ2J4BKIBY.jpg "Warning light for delay in harvest settlement")
The pace of harvest settlement is lower than expected and this situation is highlighted by economic analysts who warn of possible problems in the exchange plan that could eventually affect the price of the dollar and inflation, in addition to a possible change in expectations.
A report from the Grain Exchange indicated that 36% of the available soybeans were harvested at the moment, which represents a delay of 12 points compared to the average of the last five years.
This delay represents about six million tons, which translated into foreign currency is equivalent to US$2.5 billion.
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Data emerging from the Central Bank’s exchange operations show that the liquidation of cereals is of the order of US$ 80 million, a value that is below the historical average for this moment.
The pace of liquidation is slow in 2024, despite good harvests. (The Voice / Archive)
For their part, the Chamber of the Oil Industry of the Argentine Republic (Ciara) and the Cereal Exporters Center (CEC) reported “that in April the companies in the sector settled US$ 1,910 million, which represents an increase in relation to March of 27%, but a decrease of 21.5% in relation to the same month last year (soybean dollar) and an improvement of 23% in relation to the accumulated this year compared to the year 2023 (period affected by drought)”
In its latest weekly report, the Personal Investment Portfolio Consulting (PPI) considered that “although initially the harvest would have been delayed due to weather conditions, sector experts consider that the price of commodities and the effective exchange rate would discourage massive sales. of the producers.”
As additional information that supports his position, he pointed out that “when observing the figures from the Ministry of Agriculture, it is evident that producers prefer to refinance their debts in dollars contracted in the 2022/2023 campaign (drought) rather than selling to pay them off. “Only 24% of soybeans sold have a fixed price (9.7 MTn/12.8 MTn), while 45% of corn (7.3 MTn/16.2 MTn).”
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Economist Salvador Vitelli specified that “agricultural settlements fell 21.6% year-on-year in April 2024,” making it “the April with the fewest settlements since 2020 (pandemic).”
This shows that although climate problems have an influence, the expectations of producers also play a determining role in decision-making.
The Minister of Economy, Luis Caputo, spoke about this situation in his last public appearance: “There is an innate speculative factor in both the producer and the cereal companies that we do not control. “We can guarantee the maximum possible stability to reduce it to a minimum, but I cannot predict something that is not in our control.”
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However, the Secretary of the Coordinator of Productive Policies, Juan Pazos, held a meeting last Tuesday with grain analysts to send a message to the products in the sense that it is in their best interest to liquidate because there will be no devaluation and the blend dollar (liquidation 80 % MULC and 20% CCL) may disappear.
Added to this in the last few hours was a statement by President Javier Milei ruling out the possibility of a devaluation to gain competitiveness.
The latest work by the consulting firm Ecolatina coincided with the climate factor as the reason for the delay and the speculation of the producers.
“The liquidation of the harvest is affected by logistical and climatic issues, so it is expected to show a better performance in the coming weeks,” the firm said.
Regarding liquidation expectations, he considered that “although the authorities could offer greater incentives to producers to encourage liquidation, the issue depends on expectations. The scheme will be considered sustainable as long as grain holders do not perceive that a new discrete jump in the official exchange rate may occur in the short term. In short, faced with an expectation of devaluation in the short term, there is no incentive that is sufficient.”
A similar opinion is held by ABC Mercados, which analyzes the level of movement in the Single and Free Exchange Market (MULC) day by day: “The thick harvest has not yet been felt in the market, exporters of cereals and oilseeds have been liquidating on an average which gives less than US$ 80 million in the last two weeks.”
These opinions were joined by analyst Gustavo Ber who indicated that “operators remain attentive to the slower pace at which the Central Bank’s purchases have been interspersed in some rounds due to fluctuations in volumes and the greater participation of importers, even though “It is believed that this respite would be temporary in the face of the next acceleration of the liquidations of the coarse harvest.”
Exchange tug of war
Despite multiple signs to the contrary, producers continue to wait for a change in the pace of the crawling peg (daily devaluation) applied by the Central Bank.
Milei and Caputo are firm in their position of not devaluing and are making efforts to deactivate expectations in that regard and achieve a greater flow of currency that is not appreciated for now. The accumulation of dollars in the next quarter is fundamental for the Government’s plans regarding the exit from the stocks.
In this scenario, during April the BCRA accumulated US$3,348 million, the best result of the year. Despite this, gross reserves only increased by US$ 448 million in the month due to the payment of maturities in foreign currency.
The good news comes from the climate side since above-normal rainfall was expected for the coming weeks, but in principle there would be a favorable change.
“The first week of May is presented as an expected relief for producers in the Pampas region,” according to the Strategic Guide for Agriculture (GEA) of the Rosario Stock Exchange (BCR), which noted that “optimal conditions are expected to advance the soybean harvest, one of the most delayed in the last eight years.”
“With 40% of prime soybeans still unharvested, encouraging forecasts indicate a decrease in rainfall, well below previous expectations. The most significant records were minimal in the last weekend, with just 2.4 millimeters in General Pinto, and in the rest, the rains remained in negligible amounts,” the entity noted.
Consequently, this performance should begin to be observed strongly in the financial markets in the coming days.