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November 25, 2014

Argentine Farmers continue to be Slow Sellers of their Grain

The Argentine government continues to pressure farmers to sell any remaining grain they may have in storage so that the government can collect badly needed revenue from the export tax. A number of ideas have been floated in recent months as to what the government could do to convince farmers to sell their grain. The latest idea being that farmers may not qualify for production loans from the National Bank of Argentina unless they have sold all their old crop.

I would assume that most farmers have already obtained the resources they need to plant their 2014/15 crops so it's hard to see how this prohibition for loans would have a major impact on their decision to sell or not sell their 2013/14 grain production. If enacted, it might have more of an impact in mid-2015 when farmers in Argentina start planning for their 2015/16 crop.

According the latest report from the Minister of Agriculture, as of November 12th, Argentine farmers had sold 86% of their 2013/14 corn production compared to 82% in November of 2013. Soybean sales in Argentina are not quite as advanced with 69% of the 2013/14 soybean crop sold compared to 78% in November of 2013. That means there are still approximately 16 million tons of soybeans from the 2013/14 crop waiting to be sold in Argentina.

Looking at the 2014/15 crop that farmers in Argentina are now planting, very little of the crop has been sold. The Minister reported that they have only forward contracted approximately 6% of their anticipated corn production and 3% of their anticipated soybean production. Both of these numbers are low, but about on par with the selling pace of last year.

If the government does not take some radical action, the farmers in Argentina will continue to be slow sellers of last year's crops. The economic situation in Argentina, while still very poor, it is not quite as dire as it appeared several months ago. Therefore, all the talk about the government running out of money and therefore they needed to force the farmers to sell their remaining grain supplies, may end up being more bluster than reality.