The debate over the repurchase of debt bonds includes a piece of information that further aggravates the controversy: the foreseen sacrifice of foreign exchange -for an amount of u$s1,000 million– It coincides with the income that field sales will leave in January.
This is a high figure if the situation of the reserves is taken into account, but it also highlights the harsh situation of the field: a year ago they had entered US$2.400 million in January alone, part of a record summer that left $7.65 billion in the coffers of the Central Bank. Of course, a year ago not only did you not suffer the devastating effect of drought that is being seen today, but also that the convulsed geopolitical scenario in Europe was driving commodity prices to record levels.
The truth is that, with a summer in which a year-on-year collapse in the contribution of agricultural exports is projected -above all, after the 40% drop in wheat harvest-, and with all eyes on the turbulence of the exchange market, with each passing day the prospect of a third edition of the “soybean dollar” gains more strength.
This suspicion is also based on the financial requirements of 2023: unlike last year, in which the IMF left a net balance of more than $6 billion, this year almost $2 billion will have to be paid, which will make it more difficult to meet the reserve accumulation goal of some US$4.8 billion.
With these data in view, the second quarter -the one that typically leaves the largest amount of foreign currency for exports- seems very distant and requires the Minister Sergio Massa once again show off its pragmatism to get dollars.
In reality, a third edition of the “soy dollar” no longer generates practically no resistance at the political level: Kirchnerism, which was scandalized by what it considered a surrender to the “devaluation lobby” and which defined Massa’s measures as “resolution 521” -because it was the inverse of the remembered 125- has already assumed that this is a battle loss.
Sergio Massa responded to the questions of Kirchnerism, which equated the “soybean dollar” with “blackmail” from the countryside
Massa himself considered the political discussion settled in a recent interview with horace verbitskyin which he rejected the descriptions of “conditioning” or “blackmail” to describe the preferential exchange rate for soybean producers.
“We have different visions. I believe that the best is what gives results to Argentina, and I do not experience the management of tensions as blackmail but as the responsibility that someone has to find the balance points”Massa said.
Soybean dollar 3: at what price would the producers sell?
But the fact that, from a political point of view, Massa has paved the way to re-implement a special dollar for soybeans does not mean that doubts do not persist. The main one is if there is still room for producers to liquidate their stocksnow much more diminished and with the prospect of a bad campaign.
At the beginning of September, when the first version of the “soybean dollar”, there was in the silobags about 22 million tons, with which the goal of a sale for US$5,000 million was considered achievable. In fact, growers responded enthusiastically, selling 10 million tons.
Already in the second edition, in December, the product stock in the silobags was much smaller, did not reach 11 million tonsand the final result, although it was satisfactory, reflected this lower stored capacity: 6 million tons were sold, leaving US$3.1 billion in the coffers of the Central Bank.
A possible third edition of the “soybean dollar” would already suppose a very different panorama: it is estimated that today the existence of soybeans in the hands of producers around 5 million tons. If the exporters maintained a behavior similar to that of previous experiences, then we would have to wait a sale of less than 3 million tonswhich would leave a probable contribution of US$1,000 million. Coincidentally, the same figure that will be sacrificed for the repurchase of sovereign debt.
In other words, everything indicates that the forecast made by Massa’s critics is coming true: the export incentive with a high exchange rate had managed to advance exports which, in any case, were going to take place. And that the cost of that overtaking would be a retraction of future sales.
Due to the drought, income from agricultural exports will be barely US$1,000 million in January, 60% less than a year ago
To make matters worse, there are poor prospects for the next harvest. There are still unplanted areas, awaiting rains that will improve yields, and analyst forecasts -such as the recently released report from the Buenos Aires Grain Exchange- point to a campaign that will leave some 35 million tons, which which will imply a possible drop of 17% compared to the previous year.
This implies that growers are now in less urgency to turn their beans into money -because they already obtained liquidity from the two incentive programs- and, in addition, they must be extremely cautious due to the risk of losing capital in the face of a bad campaign.
It is at this point that the inevitable question arises: what would be the price at which producers could sell in a circumstance like the current one? Some analysts, like Emilio’s Marianneestimate that to get rid of their stocks, soybeans will want an exchange rate of no less than $260 to the dollar to be recognized. It is the figure that is arrived at taking into account the future dollar and the expected price of soybeans for March.
The figure could even fall short if inflation does not go on the downward path predicted by Massa but on the one forecast by the economists consulted in the REM survey of the Central Bank. In that case, the price of last December’s “soybean dollar 2”, adjusted for expected inflation, should be closer to $270 per dollar.
Is Soybean Worth Another Dollar?
Would Massa be willing to make that offer? Judging by the background and his statements, everything indicates yes. What is not so clear is the reaction that the producers would have.
In short, the data that has marked when a government proposal seems satisfactory and when it is not, is the percentage of the global price that they manage to pocket after export. The success of the “soybean dollar” resides in the fact that, after deducting the withholdings and making the conversion to dollars in the financial market, the producers obtained 49% of the international price, while without the preferential regime they could barely pocket 35%.
The other factor that will influence the behavior of producers is that of the expectation of international market pricesand it is a piece of information that could play in favor of selling in the short term, given that analysts consolidate the view that there is not much room for increases.
The second version of the “soybean dollar” left, as a side effect, the injection of $489,000 million due to the exchange rate difference in currency operations
The explanation is the “Brazil factor”: unlike what happened in other years of drought, this time the entire region was not affected -which would have lowered production projections globally- but a record volume of 153 million tons is expected in the neighboring country soy.
That would offset the drop in Argentina’s contribution to international trade. As, on the other hand, within the framework of a global recession, a contraction in demand is expected from the main importing countries, the the price chartin the best case, would remain at their current levels.
Collateral costs under the microscope
The truth is that, at this point, almost all economists believe that a third edition of the “soybean dollar” will be inevitable. But the question is whether, as things are set out, Massa will continue to find it a good business. After all, the expectation of him would be limited to a relatively minor reinforcement from the Central Bank’s box, for which the cost of a number of side effects
As economists – both those of the orthodox line and those “Keynesians” close to Kirchnerism – have studied, the costs are high in terms of involuntary monetary expansion.
The fact of buying expensive dollars from soybeans and then reselling them cheaply to importers would imply, in fact, another injection of weights in a market that already has enough threats on the monetary front.
Speaking in numbers, only with the experience of December, $489,000 million were poured into the market. It was the announced B side of the soybean dollar: the short-term objective of strengthening the reserves was paid for with a worsening on the flank of the anti-inflationary fight.
