As Argentina’s third soy dollar scheme draws to an end, revenues generated are close to the initial estimates set by the government, but the scheme is not even close to being considered a success, industry sources told Fastmarkets Agriculture.
To compensate for two recent national holidays, the Argentine government extended the validity period of the scheme to Friday, June 2.
It had been initially scheduled to end on Wednesday, June 31.
“Soy dollar 3 was performing very poorly until earlier this week when they liquidated A LOT, and thus they achieved the “objective” that the government had set for itself, or that the exporters had “committed to fulfilling,” Paulina Lescano, agricultural engineer, and specialist in agricultural markets told us.
“But it was not a success by any means.”
The program aimed to stimulate exports and increase the government’s dollar reserves by setting a preferential exchange rate of 300 pesos to the dollar for sales of soybean and by-products and was implemented for the third time amid a financial crisis in Argentina.
During the course of this third soy dollar program, several changes were made and additional agricultural products were added in a bid to maximize revenue generation.
Since the beginning of the program on April 10, export license applications for the soybean complex – mostly soy meal – have totaled 6 million tonnes and the accumulated value of these reached $5 billion.
The Argentinean government’s initial expectation was 7 million-10 million tonnes in sales and revenues of around $6 billion.
Soy dollar impact on exports and revenue
The first time a soy dollar plan was implemented, was in September 2022; registered export licenses totaled 13 million tonnes, with $ 7.5 billion in revenue.
The second time the plan was implemented, in December last year, export license applications amounted to 4.1 million tonnes with a $3 billion revenue.
After a slow sales start, the Argentinian government included new products in the current scheme, such as barley, sunflower, and sorghum.
However, it was only in the last few days that soybean complex trades were boosted, allowing for more dollars to flow into the government coffers.
Monday, May 29, saw the highest volume of soybean complex sales in a single day since the beginning of the program, with 1 million tonnes traded – mostly soy meal.
And on May 31, which should have been the last day of the program, exchange liquidation reached its highest volume for a single day, at $1 billion.
“The strong volume we’ve seen in the last few days, especially Monday, is explained because exporters had given producers until Monday to fix sales prices,” Javier Preciado Patiño, analyst and former Undersecretary of Agricultural Markets at Argentina’s Ministry of Agriculture, MAGyP, told Fastmarkets.
In Argentina, sales of agricultural products from producers to exporters can be made in two ways, with prices fixed at the moment of sale or fixed at a future date to be agreed between the parties.
According to Patiño, the program faced issues such as low grain availability, as drought cut Argentina’s soybean production to 21 million tonnes, while the country had low stocks.
The main reason, however, for its lack of success was the exchange rate of 300 pesos set, as this was 26% below the unofficial peso-to-dollar exchange rate when the scheme was launched and 41% above the official dollar rate.
As of Wednesday, the preferential exchange rate was only 27% above the official rate and 39% below the unofficial rate.
Therefore, it was not attractive enough to motivate producers to sell big volumes.
Corn dollar or soy dollar 4?
Rumors of a potential “corn dollar” scheme as well as of a fourth soy dollar scheme meanwhile continue to grow.
At the beginning of the current soy dollar scheme, when other products were included, there was market speculation that the government would also add corn to the list, but in the end, it did not, as this might result in higher inflation rates.
“I believe it would be a mistake to adopt this measure due to the impact on domestic food prices, as a higher-priced corn would affect the poultry, pork, dairy, and feed chain,” Patiño said.
He believes the government would be more likely to launch a fourth soy dollar scheme in the second half of the year.
“This is the lesser of two evils since 90% of production is exported and the impact of soybean meal on domestic consumption is more controllable,” he said.
Lescano says a fourth soy dollar is likely to take place before the end of the year.
“The producers who have already sold taking advantage of that soybean dollar will not sell anything in the short term, especially knowing that some soybean dollar always ends up coming out,” she said.
“So, if the government wants more dollars, it will have to put in another soybean dollar unless it gets dollars from China, the International Monetary Fund, or somewhere else,” she added.
