BUENOS AIRES Argentina will put downward pressure on world food prices by exporting more soy this year, even as growers hedge against the country's dysfunctional financial system by hoarding a bigger chunk of what is expected to be a record high crop.
The biggest harvest ever seen on the Pampas farm belt started last week, setting the stage for increased exports from the world's No. 3 soybean supplier. The size of the expected crop increase will at the same time allow growers to stockpile a larger percentage of the crop than last year.
Farmers are hanging onto their soybeans to use as a unit of savings preferable to Argentina's anemic peso, which has weakened by 18.2 percent this year. They use beans to barter for everything from seeds to pickup trucks, restricting supply and supporting international soy prices over the last year.
"Farmers will sell more volume of soybeans this season. But because the harvest is expected to be so much bigger than it was last year, sales will represent a lower percentage of the overall crop," said Pablo Adreani, head of AgriPAC consultants.
He expects sales of 20.75 million metric tons for March through May, or 38 percent of total projected 2013/14 production compared with 22.19 million metric tons in the same three month period last year, which represented 47 percent of Argentina's total 2012/13 soybean harvest.
In March-May 2012, Adreani's research shows growers sold 26.47 million metric tons, or 68 percent of 2011/12 production.
Despite being a top source of soy and corn used as animal feed as far away as Asia, where an emerging middle class wants more beef and chicken in its diet, Argentina's economy has been pounded down by one of the world's highest inflation rates.
The trend of growers hoarding crops to compensate for financial uncertainty has been more than matched however by soy production increases made possible about by Argentina's all-out embrace of yield-bolstering genetic seed technology.
BEANS OUTSHINE PESO
The Rosario grains exchange expects Argentina's upcoming soy harvest to come in at 54.7 million metric tons versus 48.3 million in 2013. The Argentine government called the 2013 crop at 49.3 million metric tons and has not yet issued a 2014 forecast.
Argentina's record high soy crop was 52.7 million metric tons collected in 2010, according to the agriculture ministry.
As of March 12, the agriculture ministry says soy exporters along with producers of soyoil and soymeal had purchased 7.1 million metric tons of the beans expected to come in this year, down from 9.4 million metric tons sold by the same point in 2013.
The lower forward sales figure can be explained in part by lower international soybean prices.
"It will be a very trying year because of the increases in inflation, and with less operating capital available at a higher cost from the banks," said David Hughes, who manages thousands of hectares of farmland in Buenos Aires province.
"The only easily tradable currency we have is the soybean. So we will take a lot of care on how and when we sell our crop," Hughes added.
He said he agrees with Adreani's forecast that this year's record crop will mean higher export volume, but represent a smaller proportion of the overall harvest versus 2013's crop.
SELL AS LITTLE AS POSSIBLE
Investors have long clamored for President Cristina Fernandez to tighten fiscal policy in a bid to control inflation and slow the outflow of central bank reserves, which have tumbled 33.7 percent over the last year to $27.2 billion.
The peso has weakened 36 percent over the last 12 months to 7.975 per U.S. dollar, while private economists say consumer prices are rising at a rate of more than 30 percent per year.
Wall Street hopes Argentina's economic policies will move in a market-friendly direction after Fernandez's second term ends late next year. But with the race to replace her wide open, there is no guarantee of that. Her muted reaction to high inflation has done nothing to increase business confidence.
"The government is slowly coming to grips with what has to be done, but there is no sense of urgency. Jumps in the value of the dollar later in the year cannot be ruled out," said Guillermo Nielsen, a Buenos Aires-based economist and former Argentine finance secretary.
"So the incentives for not selling the harvest are stronger this year than last. Farmers will sell part of the crop in order to make urgent payments, such as taxes and payroll, that cannot be bartered in beans. But," he added, "the attitude of selling the least amount of the crop possible will continue."
(Reporting by Hugh Bronstein; editing by Andrew Hay)