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February 5, 2014

Argentine Farmers Hold their Grain amid Economic Turmoil

The economic turmoil in Argentina has forced many farmers to hold off selling any more of the grain. Farmers in Argentina are still holding onto approximately 8 million metric tons of last year's soybean crop and 9 million tons of this year's wheat crop. Farmers view the grain as their hedge against roaring inflation estimated at approximately 30% and climbing. In the wake of the recent devaluation of the Argentine peso, farmers are going to hold onto their grain until they feel the devaluation process has run its course.

Over the last two weeks, the government has allowed a partial devaluation of the currency, but most observers feel there is still the possibility of further devaluations. Until that process is complete, farmers are going to be very reluctant sellers. Once the harvest of the new crop soybeans begins in March, farmers will be forced to sell some of their soybeans to pay immediate bills and to generate cash flow, but until then, they will market very little of their grain.

The Argentine government is desperate for additional revenues and there are many rumors currently circulating in Argentina that the government will try to force the farmers to sell their grain in order to generate the revenue from the export taxes on grain. The rumors include the possibility that the government may levy fines for farmers deemed to not be selling their grain fast enough. There has also been talk of the creation of a National Purchasing Bureau where the government could better control the purchasing and export of grain. It's also possible that the government would increase the export tax on soybeans from its current 35% to 40% or higher.

The government is in a difficult position, they are running out of hard currency and basically agricultural exports is the principal way for hard currency to flow into the country. If any of these measures are instituted, the farmers in Argentina are certain to stage mass protests similar to several years ago when they forced the government to back away from a proposal to greatly increase the export taxes.

Generally, the weather in Argentina has improved over the last several weeks and approximately 50% to 60% of the soybeans are rated in good condition with adequate soil moisture. The remaining 40% to 50% is rated in average condition and in need of some additional soil moisture. Most of the soybeans are flowering, setting pods, and filling pods. The driest areas of Argentina are in the southern and western production regions.

Planting of the corn crop in Argentina is nearly complete with a few remaining hectares to be planted in far northern Argentina. The condition of the corn crop is highly variable depending on the growth stage of the crop and if pollination was impacted by the previous episodes of hot and dry weather that occurred during December and January. The development of the corn crop is very spread out this year with the most advanced crop ready for harvest and the latest planted corn still in vegetative development.