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April 14, 2015

Argentine Farmers will probably be Slow Sellers of their 2014/15 Soy

Argentine farmers continue to report outstanding soybean yields and the question now is how fast they will sell their record soybean crop. Farmers in Argentina have purchased 300,000 silo bags for this growing season to store primarily soybeans, so it appears like they are preparing to hold a lot of their 2014/15 soybean production. If we assume that all of those silo bags were the largest ones, then the bags purchased this year would hold approximately 5 million tons of soybeans.

The government of course wants the farmers to sell as quickly as possible in order to collect the 35% export tax on soybeans. But it remains to be seen how aggressive they will be in trying to force farmers to sell. Each one of those new silo bags were registered with the government, so they know who bought them. The government has already indicated that if a farmer is deemed to be selling his soybeans too slowly he would not qualify for new production loans from the national bank. The way it appears now, the farmers may defy the government and hold onto a significant portion of their production.

At some point though, the soybeans in those silo bags must be sold. Some of the soybeans have already been in the bags for two years and they will start to go out of condition. When that happens, there will be a lot of Argentine soybeans flowing into the market.

There is also another reason why they will not be anxious to sell their soybeans and that is the presidential elections in October. President Kirchner cannot run for reelection and farmers are hoping that the new government will be more attentive to their economic plight. One of the leading opposition candidates for president has stated that if he is elected, he would immediately eliminate the export tax on corn and wheat as well as the export quotas for both of those crops. For soybeans, he would eliminate the 35% export tax in a series of steps over three years.

If that would turn out to be the case, the farmers would then be wise to hold onto their soybeans until the new president takes office in December. Additionally, it could also stimulate additional corn acreage in Argentina. Argentine farmers have known for a long time that growing a monocrop of soybeans year after year is not the best agronomic practice, but they have been forced to do by government policies. Currently they plant 6-7 times more hectares of soybeans than corn, so they cannot do a normal crop rotation. If the export tax and export quotas for corn were eliminated, farmers would probably take advantage of the resulting improved corn price to plant more corn in an attempt to get back to a more sustainable crop rotation.