Nov 27, 2023

Argentina Farmers Hopeful with Election of Javier Milei as President

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

Farmers in Argentina see a window of opportunity with the election of Javier Milei as Argentina's new president. Milei will assume power on December 10th with the promise to have only one exchange rate of the peso to the dollar and to "dollarize" the Argentine economy. The change in the exchange rate could be accomplished through executive action. No one knows for sure how "dollarization" could be accomplished, but until then, there will probably be a devaluation of the peso, which would benefit farmers who still have grain to sell.

All this currency uncertainty is going to cause short term "pain and suffering" for the average wage earner in Argentina, but it is probably good news for farmers who are still holding gain, which is priced in dollars, but paid in the local currency.

Longer term, he has also promised to eliminate export taxes on agricultural commodities, but that might be harder to accomplish because he would need the approval of Congress. The current export tax on soybeans is 33%.

Some analysts predict that the combination of a devalued peso and the elimination of the export tax could result in doubling the price that Argentine farmers receive for their soybeans. That might be enough of an incentive for farmers to switch more of their 2023/24 intended corn and sunflower acreage to soybeans instead. As of late last week, the soybeans in Argentina were 34.8% planted and the corn was 26.2% planted.