December 2, 2008


Argentine farmers withhold soy stocks on poor prices

Argentina's farmers are stockpiling millions of tonnes of soy in hopes of a price rebound, forcing domestic soy crushers to slow their operations or to even bring forward factory maintenance shutdown.


A 49-percent fall in global prices since July's record high has brought Argentina's soy market to a virtual standstill.


Another reason for the stockpiling is the weather, as the farmers are not sure of next year's prospects, according to Lorena D'Angelo, an analyst at Argentina's grains exchange in the city of Rosario.


Argentina's farmers are halfway through sowing the 2008-09 soy, but parched soils have led to a tricking start in seeding in many areas, although recent rainfall have eased fears of a poor harvest.


Trade volume in Rosario has seldom exceeded 5,000 tonnes per day in the past three months, a sharp drop than before prices slumped as the global financial crisis raised fears of declining demand in key markets such as China.


Industry analysts estimate that about 10-15 million tonnes of unsold 2007-08 soy are stockpiled, far more than they would normally have left at this time of the year.


D'Angelo said a normal campaign might see 3-3.5 million tonnes of soy left on the farm. Argentina collected about 46.2 million tonnes in the previous harvest.


Early this year, farmers clashed with the government over a tax hike on soy exports, disrupting the soy trade and operations of crushers. Farmers refused to sell grains for weeks, aiming to deprive the government of income from export taxes.


However, by the time the conflict ended in July, prices were already dropping and Argentina's grain market never returned to their usual stride.


Months of conflict and the current low prices mean the farmers do not want to sell, said Pablo Adreani, director of the Agripac consulting firm, estimating that farmers have still got about 30 percent of the harvest.


Soy processing plants processed 10-percent less soy in September, and industry analysts expect a similar slide in the past two months.


Farmers are expected to let go of their stocks only if there is a price rebound, especially since the government is not seen to cut soy export taxes in the near future.


Argentina is the world's top supplier of soymeal and the third largest exporter of unprocessed soy.

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