The only source of income of genuine dollars, which was eagerly awaited before the middle of the year, continues to turn its back on the Government of Javier Milei. The Chamber of the Oil Industry of the Argentine Republic (CIARA) and the Cereal Exporters Center (CEC), entities that represent 48% of Argentine exports, confirmed today that export settlement levels had a very significant drop in May, comparing itself against a 2023 of extreme drought. In short, due to a mix of climate issues, rising international prices and pressure for the Government to devalue and improve its profits, the farmers decided not to remove the grains, especially soybeans, from the fields to send them to exporters. Thus, he showed that if he needs to sell at cost he will do so in dribs and drabs and, until then, he will stockpile in silobags.
In numbers, CIARA reported that companies in the sector liquidated the sum of US$2,612 million dollars; “implying an increase of 37% in relation to the month of April of this year, but a decrease of 37% in relation to the same month of May of the year 2023 (soybean dollar) and a slight fall of 4% in relation to the accumulated of this year compared to the year 2024.” They added that “the foreign exchange income for the month of May is the result of the export dollar regime in force since December 2023, international prices, the impact of the weather on the corn and soybean harvest rate, and the cost ratio of inputs and grains”.
This equation of lack of soybean dollars adds problems to a Government that is beginning to be questioned for fictionalizing the stock of foreign currency in the coffers of the Central Bank (BCRA). With the swap with China at risk, without paying imports or the energy bill, with a recession that helps and without dollars from the Monetary Fund (IMF), the Minister of Economy Luis Caputo reached the bottleneck of 2024 without the income they expected. This also explains why in the Casa Rosada there is so much desperation for the fiscal package to be voted positively and the controversial money laundering to begin to spread, the last letter of fresh and fast dollars that Milei can appeal to. It is worth highlighting that this currency drought is what is hindering the official desire to open the exchange rate and that, in parallel, it puts pressure not only on the blue dollar but also on financial institutions.
“High levels of idle capacity”
The CIARA report also warns about an imminent sectoral crisis due to factory shutdowns and the negative impact on investments. “Grain exports continue to work with high levels of idle capacity, as well as the oil industry, suffering permanent negative margins; something that grew this month due to strikes by oil unions that paralyzed activity for reasons beyond the control of the industry,” they detailed.
Likewise, they indicated that “the monthly income of foreign currency, transformed into pesos, is the mechanism that allows them to continue purchasing grains from producers at the best possible price. The liquidation of foreign currency is fundamentally related to the purchase of grains that will later be exported, whether in their same state or as processed products, after industrial transformation. Most of the foreign exchange income in this sector occurs well in advance of export, an anticipation that is around 30 days in the case of grain exports and reaches. up to 90 days in the case of the export of oils and protein flours. This anticipation also depends on the time of the campaign and the grain in question, so there are no delays in the settlement of foreign currency.”
It should be noted that Caputo warned Milei that part of the 15 billion dollars he needed to open the exchange rate would come, precisely, from the foreign currency that agriculture was going to provide. It was even logical that sales would grow, since the drought made comparison with a very bad base, but it did not happen. Naturally, after the mini exchange rate run that put the dollar back around 1,300 pesos, the value it had at the end of last year, it generated confirmation in the countryside that the exchange rate delay not only exists, but has since sector have to pressure to go look for an improvement in their dollar. Government sources rule out a new soy dollar, because it would mean greater issuance of pesos to cover the benefit, and they also insist that they are far from endorsing another devaluation. Today, the Executive is in a trap with a sector that pressures it to move pieces by force.
