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An unsettling question: what if the dollar does not arrive? – 03/17/2019



Engineer Pablo Adreani, an agroeconomic analyst

The forecasted foreign exchange earnings between January and October 2019 will be lower than that recorded in the same period of 2018, when the worst drought in history occurred, with foreign exchange earnings of 16,800 million USD versus 18,300 million USD. This will result in a fall $ 1,500 million compared to the previous year. All this despite the rise $ 6,000 million in the gross value of this year's production when the recovery of soy and corn from drought of the previous season.

Will the soybean dollars come? The government expects a dollar bubble with the arrival of soybean harvest from April and May, which has historically been the months of the biggest sale of oilseeds by the manufacturer. But the most important thing is not the income of that bimester, but the revenue from June to the same day of presidential elections in October. Adding another quota of uncertainty, we need to consider the August PASS and successive provincial elections that are separated from the national. Unlike the months that preceded the presidential election in October 2015, this time the uncertainty of the results is much greater and the economic situation is worse. Facing polarized elections amid high inflation, high dollar volatility, strong projected devaluation, high interest rates and one of the moments with the highest tax pressure on exports of agricultural products are enough warning factors that influence the strategy of selling cereals from the manufacturer. And the sale of cereals, its humor, directly affects the liquidation of foreign currency by the exporter.

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In the months preceding the presidential election in 2015, there was a sharp fall in currency settlement. They crossed from $ 2,950 million in June to $ 1,141 million in October. The producers sold less and less cereals until they reached the minimum of the same day of the election. When the election result was known, the producers reactivated their sales again. This behavior is repeated every odd year as a sort of dogma, but there is a Copernican change in the pattern of sales in the years when the presidential election is held.

Until February 2019 cumulative sales of the producers reached 3,300 million USD and only 12% corresponds to the soybean, 433 million US $. The remaining 88% are wheat and corn ($ 2.260 million for wheat and $ 1.040 million for corn). This shows us that in December-January-February, the quarter was a wheat producer that sold an unusually large amount and a posteriori record of harvest. The sales of corn were very similar between 2018 and 2019. From this analysis we can risk some trends in this election year. The next sales cycle, within two months, will be done by the producer, with corn, as the vintage will start one month before the soybean, and due to the record returns expected, there will be restrictions on the warehouse. Our analysis estimates that from March to April the manufacturer will sell at least 6 million tons of corn ($ 840 million), and in the case of soya, the estimated sales may reach 7 million tons ($ 1,600 million).

In last year's liquidation since June, there has been a sharp decline due to drought and excessive rain in crop and corn. Between December and February a peak of wheat with high historical prices, from US $ 200 per ton. Perfect combination for the manufacturer to earn money with wheat. The peak of growth in foreign exchange earnings was projected from March to May, and since then the slide has begun until the October elections.

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Why will the producer not sell the harvest as the government wants? Firstly, we need to mention the political factor, the uncertainty about the outcome of the PASO, and then the presidential election, which change the seller's sales attitude and commercial pattern. This adds a domestic high voltage factor: a combination of a high level of inflation with high interest rates and its resistance to variation of the course. This unique factor puts the manufacturer on alert and encourages him to sell the necessary minimum, since his culture is quoted in dollars and is valued before each increase in the currency.

On the other hand, the return of retention and the implementation of a $ 4 dollar retention plan for each dollar exported returned to Argentina in primary exports. We are confronted with a model that not only does not promote the export of agricultural products, but also something worse: it has destroyed the creation of additional value and the competitiveness of many sectors, including the oil industry. This is the sector that creates the largest foreign currency for the country, the Argentine pop corn icon, until this year, the world's first exporter that once moved to the United States and Brazil, and eventually produces regional economies.

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When it comes to a $ 4 dollar tax per dollar for oil and soybean meal, there is a very serious conceptual mistake by the government. The sector requires at least to be reduced from $ 4 to $ 3, and the government says "we do not want to subsidize any sector". Does the sector not seek subsidies? It requires that taxation on distortion be applied to products with higher added value of soya and generates a much higher dollar rate. The existing system punishes the added value, omitted from the competition the oil sector of the world market even from its own domestic market in Argentina, which is unable to compete with the exporters of soybeans. In order to compete, the industry has to pay less to the manufacturer; By paying less, the manufacturer is more resistant to sales; in the absence of real demand from the oil sector, at the time of harvest, there will be excessive supply of soy, which will cause collapse of the price of the seed. It damages the producer with the lowest price, and the government influences lower foreign exchange earnings, a vicious circle.

It has analyzed a tax cut from $ 4 to $ 3 for oil and soybean meal, resulting in a renewed demand for more oil sector participation, a higher sales volume of manufacturers by cutting prices down due to an increase in domestic competition, a larger volume of additional milling and revenue from US-wide currencies $ 102 million in relation to the system used by the Government. It would have happened if the government left the IMF manual and took the manual to not penalize the added value.

Wheat corn or pisingallow situation is also very serious, a $ 4 tax and a reduction in returns generate tax costs above $ 60 per tonne that go into government pockets. There is no trade activity in the world that leaves a margin of US $ 60 per tonne and the government proves it can. The cost of eliminating these disorders for pop corn is $ 12 million. The cost of unwillingness, the rapid decline in poppy exports in harvest 2019/20.

AK


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