Apr 06, 2023

Argentina Launches Its Third "Soybean Dollar" Program

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

Argentina will launch another "soybean dollar" program to encourage farmers to sell their soybeans and other agricultural products for export. This time the program could be called "agro dollar" since it involves more than just soybeans. This is the third program where a preferred exchange rate will be offered for export sales. This year's program will have an additional twist. The first two programs only involved soybeans, but this program will include other commodities such as wine, rice, cotton, barley, sorghum, citrus, wood, and maybe other regional products.

The program for soybeans will be from April 8th to May 31st. For regional products, the program will end August 30th. The preferred exchange rate will be 300 pesos per dollar compared to the current official rate of 210 pesos per dollar. The current black-market rate is approximately 400 pesos per dollar. At the end of last year, the second program offered an exchange rate of 230 pesos per dollar.

The first "soybean dollar" program in September 2022 was a big success with farmers selling 13 million tons of soybeans. The second program last December generated 5.1 million tons of sales. The environment is very different for the third program. The 2022/23 soybean crop suffered crippling losses from the worst drought in generations and inflation is now topping 100%.

Soybean yields will be very disappointing this year and farmers may be unsure of what their final production will be. Additionally, soybean seed quality is reported to be very poor this year with as much as 50% green soybeans and 30-40% small and shriveled soybeans. It may even be hard for farmers to sell their poor-quality soybeans. Therefore, it is uncertain how successful this program will be.

Ultra-high inflation may also convince farmers to hold into more grain than usual as a hedge against inflation. Additionally, this is already the third such program and there could be a fourth program later this year. Therefore, farmers may sell some of their soybeans during this program and then plan on selling more when, and if, there is a fourth program.

Argentine farmers still have approximately 17% of last year's 44 million ton soybean production left to sell, which is about 7 million tons. The government is hoping that the additional sales could bring in $15 billion, but it is unclear if farmers will sell as much as the government would like.

According to the Minister of Agriculture, farmers have forward contracted 5.5 million tons of their 2022/23 production compared to 12 million tons last year at this time. Sales have been slow as farmers wait for improved prices and the details of the "soybean dollar" program.