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Argentine Farmers hold back exporting soybeans

Argentine Farmers hold back exporting soybeans

Anyone who has flown over Argentina in the past few months cannot be but astonished at the rows and rows of sausage looking white bags which are used for storing grain once the grain silos are full.

Argentine farmers have stockpiled more than twice as many soybeans this year than in 2014 defying a government desperate to increase export tax revenue needed to finance rising state spending ahead of the October presidential election.

Growers say the increase in soybean reserves to 7.4 million tons from 3.4 million comes from a 12% larger harvest. With another record crop expected this year, farmers are holding onto beans as a hedge against high inflation ( 30% plus )and low world oilseed prices.
  More importantly now that Brazil has devalued they expect a similar devaluation in Argentina.

The unpopular government of President Cristina Fernandez, which was unable to raise cash in the global bond market after falling into defaulting last year, is now pressuring soybean growers to sell so that it can collect the 35% tax it slaps on soybean exports. They are required under a new rule to report each purchase of “silo bag” storage units. Those found to be piling up soy are disqualified from receiving state loans.

“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” said Ernesto Ambrosetti, chief economist at the Argentine Rural Society (SRA), which represents commercial farmers.

Based on estimates from the SRA and local grains exchanges the 7.4 million tons of soybeans held in reserve as of the end of last month accounted for about 14% of the 52 million tons harvested in the 2013-14 crop year. They had stockpiled 3.4 million tons at the same time last year, which was 7.1% of a 48 million ton crop.

World soy prices are hovering at $354 USD dollars per tonne compared to $527 USD a year ago, and farmers are stockpiling to wait out the current bear market.

Inventories may rise this year if world prices do not. Forecasts for the upcoming soy harvest are 56 to 60 million tonnes, well up on the 53.4 million tonne record that the government reported for last season.

Soy can be stored for up to three years or more in the  plastic silo bags that have come to dot the Pampas grain belt. They are 60 to 75 meters long and hold up to 250 tons. About 300,000 of them are sold a year in Argentina at prices starting at 480 dollars per bag.

Sales rose this year, mostly because of a bigger harvest, according to silo bag manufacturer IpesaSilo, which has about 70% of the Argentine market.

The farmers are unhappy with having to pay some of the highest taxes in the world and work with what they see as a corrupt inept government which seems to have no plan to recover from the serious recession the country is currently in. They are putting all their hope that a new government will be business friendly with elections later this year.

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