Jul 22, 2022

Farmers in South America Are Slow Sellers of Their 2021/22 Crops

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Farmers in both Brazil and Argentina have been slow sellers of their 2021/22 grain production, but for distinct reasons. In Brazil, sales have been slow because of recent price declines, while in Argentina, sales have been slow because farmers are using their grain as a hedge against inflation and further currency devaluations.

Brazil - According to the consulting firm Datagro, as of July 8, Brazilian farmers had sold 76.7% of their 2021/22 soybean crop compared to 80.2% last year and 78.8% average. This represents an advance of 6.8% for the month. For the 2021/22 safrinha corn that is currently being harvested, farmers had sold 43.4% of their corn as of July 8 compared to 65.4% last year and 58.7% average. This represents an advance of 4.8% for the month.

Forward contracting for the next soybean crop in Brazil has also been slow. Brazilian farmers have forward contracted 13.4% of their anticipated 2022/23 soybean production compared to 19.2% last year, 36.2% in 2020 and 18.7% average, according to Datagro.

Argentina - Farmers in Argentina have been holding onto their soybeans and corn as much as possible as a hedge against inflation, which is running at about 65%. They are also slow sellers because the devaluation of the Argentine peso has not kept pace with inflation. The depreciation of the official exchange rate at which crop revenues are converted from dollars to pesos has not kept pace with inflation, so farmers are waiting to see if the peso will devalue further.

As of July 15th, they had sold 46% of their soybeans compared to 57% at the same time last year. Farmers in Argentina view their crops as "money in the bank" and they will be in no hurry to sell their crops. This wait and see attitude also makes farmers very cautious concerning the 2022/23 growing season, especially with the higher cost of inputs. While a devaluation of the peso would help in selling their crop, it would hurt their purchases of anything priced in dollars such as fertilizers or chemicals.

Argentine farmers are also concerned about government interference in the export markets. The government has a history of limiting exports in order to hold down domestic food inflation and they have increased export taxes on agricultural commodities to generate needed tax revenues. All this make farmers in Argentina extremely cautious about expanding their operations.