June 9, 2020 / 6:42 PM / 2 months ago

Argentina stirs up giant soy market with state takeover

BUENOS AIRES (Reuters) - Argentina’s state takeover of embattled soy crusher Vicentin is stirring up the country’s giant export market of processed soy, the largest in the world, handing the government a strategic toehold in the important sector.

FILE PHOTO: Soy beans are seen at a Grobocopatel Hermanos company storage plant in Carlos Casares, Argentina April 16, 2018. Picture taken April 16, 2018. REUTERS/Agustin Marcarian

The country’s center-left Peronist President Alberto Fernandez announced the plan on Monday to rescue the near hundred-year-old firm that had been Argentina’s top exporter of soymeal and soybean oil before hitting financial trouble late last year.

Vicentin, which has an important crushing joint venture with Glencore, has missed payments to banks and suppliers and was heavily indebted to Argentina’s Banco de la Nacion. Its operations, barring the JV, have been largely idled since.

The government is sending a bill to Congress to pave the way for a formal state takeover, whereby Vicentin would be overseen by the agricultural arm of state energy firm YPF.

“I do think that it will be an important player in the sector,” said Argentine grains broker Guillermo Mouliá, adding though that it would time for the government to restore Vicentin to its former glory and win back the trust of producers.

Vicentin, which entered bankruptcy in February, last year held around 19% of sales of soybean meal and around 23% of all shipments of soybean oil. Argentina is a key supplier to markets including Southeast Asia, Europe and the Middle East.

Eurasia Group, a risk consultancy, said in a note that while the move was not the start of a wider nationalization trend, it did indicate that Argentina’s government “will ramp up its intervention as economic conditions worsen”.

“Overall, this decision sends a negative signal to the country’s business community, that will be concerned that taking over assets is once again a possibility,” it said.

‘EXCEPTIONAL SITUATION’

Fernandez said the move was key to securing Argentina’s food supply and all-important agricultural export sector.

“This was an exceptional decision, due to the strategic nature of the company,” the president told local radio on Tuesday. “It is not in the head of any of us to expropriate companies.”

Production Minister Matias Kuflas also highlighted the important role of the firm helping bring in foreign currency, something the country desperately needs as it grapples with a debt crisis.

Argentina’s political opposition, the party of former President Mauricio Macri, a business-friendly magnate, also criticized the plan as being dangerous and unconstitutional.

The country’s agro-export and crushing body, CIARA-CEC, said that it was not against the move, but cautioned that a state-owned soy giant would need be kept in check.

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“It is important that the future state-owned company be part of the same rules of the game and have a level playing field with other companies,” the body said in a statement.

Grains broker Mouliá, said that the fragmentation of the grains market meant that even with control of Vicentin, the government would not be able to dictate prices.

“Even though there are only few firms, the market is quite well balanced,” he said. “Vicentin will be just one more.”

Reporting by Maximilian Heath; Additioal reporting by Hugh Bronstein; Writing by Adam Jourdan; Editing by Marguerita Choy

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