Argentine ‘soy dollar’ affects Brazil, but effect should be limited, analysts say

The application of a preferential exchange rate for foreign sales of soybeans in Argentina, announced this week, has reduced the competitiveness of Brazilian grain and is already putting pressure on export premiums for the product from Brazil.

But analysts consulted by Reuters assess that these effects should not last for long, considering that the so-called “soybean dollar” exchange is scheduled to take effect in September, as a way for the neighboring country to boost the generation of foreign exchange in order to deal with the economic crisis. .

Argentina is the largest exporter of soybean oil and meal in the world, and the third largest global supplier of soybeans – a market led by Brazil.

Until last week, farmers limited sales of goods such as soybeans due to economic uncertainty in the country and speculation about the value of the local currency, but with the preferential exchange announcement, business with the Argentine oilseed increased almost fivefold.

For the analyst of the consultancy AgRural Daniele Siqueira, the first impact on the market, already felt at the beginning, was the negative pressure on the quotations on the Chicago stock exchange and on the export premiums in Brazil, both in soybeans in grains and in the by-products of the oilseed

“Our FOB price here in Brazil has dropped from US$621 to US$609 per ton,” said the specialist about the value of soy shipments.

She stated that a reduction, in fact, in the closing of export business in the Brazilian market has not yet been identified, however, the week with holidays in the United States and Brazil on Monday and Wednesday, respectively, makes the analysis difficult. “We’ll have a better idea next week,” she said.

“But, yes, the expectation is that Argentina will take some of the market from Brazil with the increase in commercialization there, stimulated by the special exchange”, estimated the analyst.

In need of foreign exchange, the Argentine government announced that soybean producers and exporters will be able, until the end of September, to export the ton of the grain using an exchange rate of 200 pesos to the US dollar, against 141 pesos before the measure, which generated a surge in sales.

Limit

The managing partner of consultancy Cogo, Carlos Cogo, agreed that this stimulus from the Argentine government could lead the country’s producers to dump stocks that were held back and increase the current supply available in the global soy market.

However, he pointed out that Argentina is coming from a crop failure and does not have such high surpluses, which could keep the market under pressure for a long time.

According to the latest official data, until August 31, before the announcement of the new exchange rate, Argentine producers had sold 52.3% of the 44 million tons of 2021/22 soybeans, compared to 62.8% recorded on the same date of the last year, when production had been 46 million tons.

According to Cogo, these little more than 50% of the harvest available for negotiation are for sales both internally (for bran/oil production) and for grain exports.

This level limits the pressure of Argentine shipments on global oilseed and Brazilian prices.

“Maybe only for the short and medium term, well before the end of the year,” he said regarding the period that Argentina’s impact on foreign soybean prices could last.

“In the very short term, it gets worse for us,” added Céleres analyst Enilson Nogueira.

“(But) I see that the loss of Brazilian competitiveness is limited because it is not known how long this measure will be in effect – if it is only September, the impact is momentary”, he commented.

He also recalled that Brazil is already heading towards the end of the export window for the soybean crop, which also minimizes the negative effect of greater Argentine competition.

Brazilian exports from January to September are projected at 71.1 million tonnes, with 3.9 million this month, according to shipment data from the exporters association Anec. This volume is close to the estimate of total shipments from Brazil in the full year of 2022, of 77.2 million tons, according to a forecast by state-owned Conab updated the day before.

Asked if the soy industry viewed Argentina’s measure with any concern, the Brazilian sector association Abiove said that it is evaluating this move and still has no way of responding.

The director general of the National Association of Grain Exporters (Anec), Sérgio Mendes, told Reuters in a note that Brazil and Argentina, “together, meet the global demand for soy and derivatives in a balanced way”, avoiding making specific comments.