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Argentine Grain Exports are well up on past years

ARGENTINE GRAIN EXPORTS

Argentine grain exports are up this year which is good news for the Let’s Change (Cambiemos) administration yesterday, as the grain sales abroad soared by 49.9 percent on the weekly comparison according to the latest data from the CIARA-CEC grain exporting chambers.

The results look even better in the yearly comparison, showing a 104.3 percent improvement.

Grain exports are a key source of dollars for the country, increasing the amount of foreign currency supply in local currency markets and thus helping strengthen the value of the peso, which the government wants to prop up for now in order to moderate price hikes following December’s lifting of the so-called “clamp” on foreign currency exchange.

The country has been struggling with a reduced inflow of dollars since grain prices fell in 2015.

Finance Minister Alfonso Prat-Gay bet that the devaluation of the official exchange rate in December, combined with the reduction of export duties, would cause grain exports to improve significantly.

While they did improve and hoarding was brought down, sales did not reach the government’s most optimistic estimates.

More relief could be coming in April, however, when the soybean sowing season begins, usually the best source of US dollars for the Argentine economy.

Corn is now more profitable

Other crops, however, got even more help from the government since it took over in December, with corn and wheat’s export duties completely eliminated.

That, according to the MAIZAR association of corn producers, means that the crop could even become more profitable than soybean for the 2015-2016 campaign, a fact that could cause farmers to expand the harvested area.

“We did not have the most efficient crop rotation in the last few years, but this year the producers are betting on more corn harvesting to improve in that front,” MAIZAR’s executive director Martín Fraguío said.

Another optimistic report came from the Let’s Change-managed Banco Ciudad, which also forecasted an overall improvement in grain sales for this year’s campaign.

But the government still has a long way to go before it ensures long-term exchange rate stability.

The high interest rates that are encouraging dollar sales come at a cost for the country, as they cause the Central Bank’s peso-denominated debt to rise. They can also cause reduced access to credit and thus slow down the economy resulting in job losses.

Prat-Gay believes that a deal with the so-called “vulture funds” would open the country’s access to international credit, a potential source of dollars that is seen as capable of stabilizing the economy.

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