Argentine farmers keep soy from weaker peso market forecast

 

 

Farmers in Argentina, one the world's largest soy producers, are doing everything they can to avoid selling their record harvest of 55 million tonnes in a bet the peso is poised to plummet.

 

Keeping their dollar-denominated commodity - two billion bushels worth US$19.3 billion - from the market when inflation is accelerating and Goldman Sachs Group Inc. predicts the currency will decline to 4.15 to the dollar from 3.90 is a form of protection, according to analysts.

 

Farmers are hoarding soy to preserve their wealth as President Cristina Fernandez de Kirchner pursues a weak peso policy intended to stimulate exports from South America's second-largest economy. Argentina outperformed Brazil and Chile last year and posted a record US$17 billion trade surplus after Fernandez presided over a 20% drop in the peso since taking office for a four-year term in December 2007.

 

The peso's loss is spurring inflation. Consumer prices may soar 25% in the next year, according to reports. Inflation at that rate would lag behind only Venezuela's 34% rate worldwide, based on data from the International Monetary Fund.

 

The peso will decline 7.3% to 4.2 per dollar by year-end, the biggest decline among 33 currencies with forecasts available, according to data. The peso has declined every year since 2003, losing a quarter of its value.

 

Chile's peso slid 7.1% against the US dollar this year after the country's pension-fund regulator changed rules on currency hedging, prompting pension funds to buy more dollars. The Brazilian real has declined 4.2% in that period.

 

Meanwhile, farmers sold about 36% of the season's soy crop, or 19.4 million tonnes, through April, compared with 38%, or 17.6 million tonnes, in the same period in 2008, according to the Rosario Cereals Exchange.

 

Sales were expected to be "far higher" this year after a drought last year curbed output and caused farmers to take on new debt, Patricia Bergero, deputy head of economic studies at the exchange, said.

 

Analysts said farmers holding on to their crops risk losing money if international soy prices fall amid rising supplies. Brazilian farmers are reaping a record crop and US growers are planting more. World soy prices will slip about 24 cents a bushel, or 2.6%, to US$9.195 a bushel by November, futures contracts on the CBOT show.

 

Soy gained about 6.2% in April in Chicago, the biggest monthly advance since November, on rising demand from China. Farmers in the US are planting for next year at a spectacular rate, according to analysts. US soy acres this year will increase 0.8% to 78.1 million, according to the USDA.

 

Meanwhile, Brazil increased its forecast on May 6 for a record soy harvest of 67.9 million tonnes, from an estimate of 67.4 million tonnes expected last month, due to above-average rains in the centre-western region, where about half the country's crop is grown. The precipitation allowed farmers to plant earlier than usual at the end of last year and increased yields.