Rising interest rates and inflation in the country are blamed for producers’ reluctance to sell their crops this summer
Just as grain starts flowing out of Ukraine’s ports comes the news that another major exporter is curtailing shipments halfway around the world.
A ship loaded with 26,000 tonnes of Ukrainian corn left the Port of Odesa on Aug. 1, destined for Lebanon.
It was the first shipment to leave the country under a new deal brokered by Turkey and the United Nations, and provided welcome relief for tight global grain markets.
But around the same time the ship was leaving the Ukrainian port, corn and soybean growers in Argentina have been cutting back on deliveries to grain elevators and crushers.
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“The farmers in Argentina have been very reluctant to sell their crops basically because of economic turmoil in the country,” said Michael Cordonnier, an analyst with the Soybean & Corn Advisor.
“(The government) just raised the prime interest rate eight percent up to 60 percent and inflation is expected to reach maybe 80 percent this year.”
The problem is that the devaluation of the peso has not kept pace with soaring inflation.
“Farmers are holding back and looking at their grain as money in the bank,” he said.
Growers expect the government will eventually have to devalue the peso and are holding onto their grain and oilseeds until that happens.
Argentina is the world’s leading exporter of soybean oil and soybean meal and the third largest shipper of corn.
The country just appointed its third minister of the economy in the past month.
There is a rumour that the government may create a special exchange rate for agricultural commodities or that it may force growers to export their crops. That heavy handed approach has been attempted in the past but didn’t work, said Cordonnier.
Argentina is still exporting agricultural commodities but farmer deliveries are down an estimated 10 to 15 percent and that is enough to disrupt the pace of crush.
He believes something has to give soon. Farmers need money to buy crop inputs because planting will start in a month or two.
When the grain starts to flow it won’t be a flood but there will be increased volumes of corn and soybean products hitting the market, which could weigh down prices.
The farmer revolt is not affecting the wheat market yet because the crop is in the middle of its growing season in Argentina.
Wheat acres are down due to dry weather and germination was poor. The outlook is for more dry weather for the next couple of months due to La Nina, which would result in a short crop.
Brazil has a big crop on the way, with local forecasts calling for a record 10 million tonnes of production.
Brazil typically relies on Argentina for any shortfall. The country usually consumes 12 to 13 million tonnes of the crop annually.
Cordonnier said Brazil is determined to become self-sufficient in wheat production in a few years and is making progress on that goal as production of the crop expands into central Brazil rather than only being produced in the south.
