Buenos Aires Herald 
Starting today, the government aims to reverse the Central Bank’s negative balance and start accumulating dollars driven by soybean sales. This will mark the debut of the third edition of the so-called “agro dollar” (previous editions of the measure were referred to as “soybean dollar”), which contemplates a differential exchange rate of AR$ 300 for the oilseed and primarily aims to obtain an inflow of US$5 billion in only 45 days.
Looking ahead, government projections estimate that an extra US$4 billion from regional economies will be liquidated from now until August (regional economies in Argentina include producers of traditional products such as yerba mate, wines, citrus, rice, tea, and wood.) This would mean an expected total of US$9 billion that would serve to tide the sector until next wheat farming season.
Sources from the sector explain that soybean sales and the liquidation of dollars from agro-exporting companies should start to come in on Monday at an average daily rate of US$160 million. The number would be enough to change the negative sign on which the Central Bank has been closing for more than 20 days. Meanwhile, producers would get an average price of around AR$110,000 per soybean ton. The main goal of this new measure is to grab not just the 7 million tons of soybeans from the last crop that remain unsold, but also the grains from the new harvest that will soon reach the country’s international ports.
Estimates say the current soybean crop won’t go over the 25-million-ton mark, as one of every three planted hectares was lost to the drought. This situation per se will contribute to lessened availability of dollars this year, but producers will also have to make sales faster than in previous years. For this reason, the government expects to collect a large volume of export taxes from the new harvest grains.
“Generally speaking, more than US$5 billion could come in, as indicated by companies in the sector. Specifically, the farming liquidation in these next 45 days could add to some US$6 billion, as long as producers take advantage of the stipulated time frame to sell at a higher price, which probably will happen,” said Javier Preciado Patiño, former undersecretary of Agricultural Markets and agro-industrial consultant.
“The question remains about what will happen after May 24, because if we take into consideration what happened with the two previous versions of the soybean dollar rate, soybean sales contracted monumentally after the differential exchange rate ended, which resulted in a smaller income of dollars. The agro dollar will play a strategic role, as it will aim to get another US$4 billion from regional economies until the end of August.”
The expert in agroindustrial issues and markets also explained a fundamental issue to consider about the agro dollar:
“It’s true that companies that use soybean in the domestic market will be hurt because they will have to pay an export price, but this is for a limited amount of time,” he said. “Also, the influence of soybeans in animal feed is small. That is why beef, poultry, or egg prices shouldn’t go up because of this measure. If that happens, it would be the result of speculation, as they mostly use corn, and the provision of that cereal is more than assured despite the drought.”
Prices and exports
The national government is specifically aiming for the agro dollar to result in a foreign currency shock that will not hurt domestic prices amidst acute inflation. This is why the scope of the measure regarding regional economies is still being defined.
The focus will be that those obtaining a differential exchange rate until late August will previously commit to supply the domestic market and sign a price control agreement. As Economy Minister Sergio Massa explained during the presentation of the new edition of the program, the companies that access the benefits are required to “participate in the price control program, sustain jobs and guarantee the volume and supply of products committed in the price control program.”
“We want to see those greater profits and regained competitiveness reflected in domestic market prices,” said Massa. “If companies don’t abide by these conditions, they will be ‘deregistered’ and will have no access to the differential exchange rate.”
The peanut and wine industries are among those who will benefit the most from this measure. For the dairy sector, their commitment to the price control agreement will be key to getting government approval. In any case, all the exporting sectors of regional economies approve of this measure, which may speed up exports and also boost the Central Bank’s reserves.
