The entire eastern fringe of La Pampa province, southeast of Buenos Aires province and some scattered plots in the south of Cordoba are still showing excessive soil moisture, preventing the advance of harvest. In the rest of the core area, producers are eager to round up labors before new rain arrive, even when conditions are far from optimal. As a result, average yield averages 4 tons per hectare, when expectations were of 5 tons/hectare. Incidentally, delays in harvest raises the risk of pod shattering which could further undercut yield potential.
Under this scenario, up to April 20th 21% of the harvest has been completed at national level. Although, the percentage is higher than the 15% registered at this date a year ago, it should be noted that excessive rain the past year resulted in a 5 million tons of production wasted. Hence, the 5-year average progress is a better reference, which amounts to 42%.
Meanwhile, prices at Rosario’s cash market are trying to set foot on US$ 232.5/ton, but that value is still too far away from the sellers’ expectations. The key issue is that while the bean prices at the local market are still close to the previous year values, annual inflation rate reached around 40%, which has been discouraging transactions.
By mid-April, exporters and crushers had bought 14.8 million tons of soybeans. Although this volume is in line both with the one registered last year and with the average of the last 5 crop years, only 32% of those commitments were made with a fixed price. Fixed prices trades added up to 42% last year while the 5-year average reached to 50%. Therefore, there is high volume of pending price 2016/2017 soybean crop production.
Price downward pressure is very difficult to overcome for two reasons. First, world supply seems ample while Brazilian output is being revised upward every month and USA farmers are ready to seed the largest area on record with soybean this year. The second reason lies in the fact that the appreciation of Argentinian currency relative to the US dollar has a full impact on the competitiveness of our goods in the international market, especially in a context where inflation is still a stumbling block. The real multilateral exchange rate index published by our National Central Bank has fallen 17% since December 2015, eroding all the competitive gain that surged one and a half year ago when the currency market was largely deregulated.
With a stronger AR peso and a weakening soybean value, export margin has fallen in the negative field. Today, the exporter’s ability to pay is close to US$ 232/ton, and therefore buying the grain in the domestic market at a higher price implies that losses will be incurred when selling the bean abroad. Oilseed crushers, devoted to export oil and meal, are in a relative better position, at US$ 236/ton.