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March 23, 2014

Argentine Farmers still holding over 7 Million Tons of Soybeans

Even though the Argentine government continues to pressure farmers to sell their soybeans from last year's production, farmers in Argentina are still holding onto approximately 7.4 million tons of soybeans from their 2013/14 production (approximately 14% of the total). According to the chief economist of the Argentine Rural Society (SRA), which represents larger producers, farmers in Argentina are holding onto the soybeans as a hedge against inflation and low international soybean prices.

The government desperately needs to revenue from the 35% export tax levied on soybeans to help keep the government solvent. Additionally, there are presidential elections in Argentina in October and the government needs the revenue from the export tax to increase spending on social programs prior to the election.

Earlier this year, the government announced that farmers who did not sell their soybeans in a timely manner could have their credit curtailed at the National Bank or even have their account at the bank closed. At the minimum, if the government deemed that they were holding too many soybeans, they would not be eligible for new production loans from the bank for the 2015/16 growing season.

At the same time last year, farmers in Argentina were holding 3.4 million tons of soybeans or approximately 7% of their 2012/13 production, so this year they are storing twice as much as the previous year.

It's hard to say where all the soybeans are located, but it is probably safe to assume that a lot of the soybeans are stored in the white silo bags that have become very popular in Argentina in recent years. The larger bags are 75 meters long and can hold 250 tons of soybeans for up to three years.

Over the last several months there have been several episodes of vandalism where someone cut open silo bags spilling the soybeans. No one has been held responsible for the vandalism, but it was widely perceived by the agricultural community that it was warning that farmers needed to sell more of their soybeans.