Javier Milei’s government depends more than ever on the forces of heaven. From now until a little beyond mid-September A substantial part of access to foreign currency is at stake for the coming monthsThe outlook will be one thing if it rains enough to allow for a significant planting of corn, especially, and quite another if La Niña, the climatic phenomenon that brings droughts and reduces agricultural production, finally reappears.
The probability of La Niña occurring between August and October increased and reached 70 percentaccording to the latest report from the US Institute for Atmospheric Studies, published this week. For its part, the Australian meteorological office indicated that the phenomenon would occur towards the end of September or beginning of October.
Regarding the impact it would have on Argentina, it is initially estimated that it will be clearly more moderate than the historic drought that ended up demolishing Alberto Fernández’s government. However, the numbers are thin in the field and a lack of rain that is prolonged or insufficient in the next six weeks can reduce production volumes, as sowing is reduced.
“It’s a time when no one knows for sure what might happen. There is a lot of uncertainty. For the agricultural producer, the perfect storm can develop: drought with La Niña, fall in international prices due to oversupply generated by other countries and increase in production costs in dollars due to the exchange rate lag,” warns specialist Javier Preciado Patiño, former official of the Ministry of Agriculture in the previous government.
Of these three factors, two are already present and are affecting the mood of rural producers. That is why what happens with the climate issue in the short term is relevant, since If the situation becomes more complicated with the arrival of La Niña, it could be the straw that breaks the camel’s back and protests against Milei’s government could begin to intensify..
Free dollar
“Most producers and rural entities have a dilemma because they are with the government, they love it, they say it supports their values, but they are in contradiction because the exchange rate policy is interventionist and they do not lower their withholdings,” explains the consultant.
“One of the biggest complaints is against the dollar table. They don’t like this 2 percent monthly increase at all. They want the market to be freed, for there to be a currency unification and for the intervention to end.“, he points out.
The situation is getting worse in the countryside because international prices are at the level they were before the pandemic, with soybean taxes maintained and the costs of inputs moving in line with the value of financial dollars.
“Soybeans are worth the same today as they were in December of last year, and in the meantime we had an accumulated inflation of 87 points.“The producer earns the same amount of money as before, but the costs of inputs, diesel and freight have skyrocketed and margins are very thin,” says Preciado Patiño.
So far, the entity of the Liaison Committee that has raised its voice the most has been the Argentine Rural Confederations (CRA). It called on the Government at the end of last month to “take urgent measures and implement the elimination of withholdings within the framework of a progressive and achievable plan.”
“The excessive and disproportionate tax burden represented by withholdings suffocates our producers, preventing their growth and development,” complained CRA, although for now the ruralists’ discontent has not gone beyond that, light years away from the open confrontation they assumed when Peronism governed.
Prices down
The price of soybeans in real terms reached its lowest level in 18 years this weekCorn is also at its most depressed value since late 2020, when pandemic-related restrictions hit global trade and sent commodity prices plummeting.
“It is clear that the price trend for the new campaign is downwards. There will be a lot of surplus soybeans and corn due to the increase in production in the United States and especially in Brazil, which has infernal power,” says Preciado Patiño.
The U.S. Department of Agriculture on Monday raised its corn and soybean production estimates from the previous month, saying it expects strong global supplies of both crops.
“With the drop in international prices and the appreciation of the peso against the dollar, producers feel that they are being left with a high price in dollars and that they are losing their export competitiveness,” says the specialist.At least he wants a soybean dollar, which was useful at the time, but in reality what he expects from the Government is to lift the restrictions and devalue“.
Luis Caputo responded this Friday that they will have to keep waiting.
However, if La Niña finally appears in the coming weeks and complicates the sowing prospects, “we will surely see another reaction from producers, because they understand that the numbers will not add up,” concludes Preciado Patiño.
