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November 24, 2015

Macri Elected New President of Argentina, Good News for Ag Sector

Mauricio Macri will become Argentina's new president after he received 51.4% of the votes in the runoff election held Sunday against Daniel Scioli who received 48.6%. After his surprisingly strong showing in the original election, he had been gaining support in the lead up to the runoff. Argentine voters were looking for a change after a decade of Kirchner administrations that started with Nestor Kirchner's election in 2003.

His election could have long term ramifications for agricultural sector in Argentina. The Kirchner administrations had a very antagonistic relationship with the agricultural community, but Macri has promised a much more cooperative relationship.

He has pledged the elimination of export taxes on corn and wheat and a 5% reduction of the soybean export tax. It is unclear how quickly he could eliminate/reduce these export taxes. Some say he could do it by decree as soon as he takes office on December 10th, while others say it would take congressional action. His promise to stop interfering in the export market could probably also be done simply by decree. Additionally, there could be a devaluation of the Argentine peso due to the lifting of the current currency controls. All of these actions would result in a price increase for Argentine farmers.

Macri stated in his campaign that agriculture is the key to jump-starting the economy and there is speculation in Argentina that he will take immediate but temporary action to stimulate the agricultural sector. One rumor is that he might significantly reduce the soybean export tax for a 90-day period as a way to stimulate sales. Another rumor is that he will allow a significant devaluation of the peso, also for a 90-day period as a way to stimulate sales, and then let the peso reach more of an equilibrium. As I said, at this point, these are just some of the rumors floating around Argentina.

The crop that would be helped first under a Macri administration would probably be corn. Farmers in Argentina will likely plant more corn in order to take advantage of improved domestic corn prices and the opportunity to return to a more normal crop rotation. Corn acreage in 2016/17 could climb to as high as 4 million hectares from the approximately 3 million hectares that are expected to be planted in 2015/16. Corn exports would rise as the acreage expands.

Wheat acreage and exports are expected to increase after several years of declining production and soybean acreage and exports should increase as well, but probably not as fast as corn and wheat.

What is still unclear is how his election might impact this year's crop acreage in Argentina. There will probably be a few more hectares of corn and soybeans planted than were initially expected, but how many is still speculative.