Argentinian farmers will likely boost exports of soybeans, corn and other products in coming months after the government loosened foreign exchange controls and President Javier Milei said export taxes will rise again at the end of June.
Those two factors, combined with better weather conditions for soybean and corn harvesting should spur sales, according to Javier Preciado Patiño, director of RIA Consultores.
The Argentinian peso is expected to weaken with the new exchange rules, which will move it from trading with a narrow peg to the dollar to moving within a wider, slowly expanding, range against the US currency.
A weaker currency will increase the number of pesos Argentinian farmers receive in exchange for products priced in dollars, such as corn, wheat, soybeans, soybean meal and soybean oil.
The new rules also get rid of a special exchange rate for exporters that left farmers with less money for their sales abroad, which will also encourage producers to sell.
Milei announced the exchange rule changes on 11 April and they went into effect today. As a result, the value of the peso weakened through out the day, losing 11pc relative to the US dollar.
Argentina has gone through a series of complicated exchange rate regimes over the years intended to prevent a rapid devaluation of the peso, keep dollars from flowing out of the country and allow the country's central bank to maintain enough dollar reserves to meet debt servicing needs and import necessary goods.
Looming tax increase
Milei's announcement today that a temporary tax reduction on ag exports will end as expected in June should also push farmers to sell more of their crops in the next few months.
Until this morning, many people in the farming sector had hoped that the tax cut initiated by the government in January would be extended, or that duties would be eliminated altogether. But Milei confirmed the end of the tax cut in June during a radio interview today.
The temporary cuts, which reduced the tax on soybeans to 26pc from 33pc, cut soybean product taxes to 24.5pc from 31pc, and trimmed the levy on corn, wheat, barley and sorghum to 9.5pc from 12pc, will revert to their previous levels, the president said.
"Let farmers know that if they want to sell, they should sell now, because the taxes will return" as scheduled, he said.
Argentinian governments have for years taxed exports of agricultural products, taking advantage of the country's status as a farming giant to raise much-needed funds, but also reducing farmers' incomes.
Waterlogged fields
Improved weather is also expected to boost sales, especially for soybeans, in the next few weeks.
Argentina's soybean harvest got off to a slow start about two weeks ago because steady rains in many areas had left fields and rural roads too soggy for farm equipment to enter.
Sunny weather in recent days has helped dry fields out, and farmers in those areas will want to pick up the pace to take advantage of improved conditions to make up for lost time, according to Patiño. The improving pace of harvest is expected to provide farmers ample supplies to sell in the coming weeks, allowing them to exploit of the advantageous currency situation.
