Argentina’s Grains Trade Paralyzed by Soybean Shortage and Peso Devaluation Anticipation

Argentina’s grains trade is currently at a standstill due to a severe shortage of soybeans caused by drought conditions and farmers holding onto their produce. This situation is further exacerbated by the anticipation of a devaluation of the peso under President-elect Javier Milei, as reported by the head of the main export chamber to Reuters.

The comments from the crushing and export body CIARA-CEC, representing major grains firms in Argentina, including Cargill and Bunge (NYSE:), come in the wake of libertarian outsider Milei’s recent election. He is set to assume office on Dec. 10.

Argentina, known as the world’s top exporter of processed soy and a major player in corn, wheat, and beef supply, is currently facing the worst grain shortage in 60 years. This, coupled with the anticipation of an imminent devaluation of the peso following Milei’s victory, has led to a state of paralysis in the grains trade, according to Gustavo Idigoras, head of CIARA-CEC.

The country’s strict capital controls and parallel exchange rates, which have soared as high as 1,000 pesos per dollar, have significantly impacted exporters, who are compelled to bring most of their overseas sales back into the country at the official rate, resulting in fewer pesos for each dollar. While the government has introduced exchange rate benefits for farmers, many producers are adopting a wait-and-see approach in anticipation of Milei’s policies, which include the removal of currency controls and tax cuts.

As a result of the soybean shortage, the crushing plants along the Parana River are operating at significantly reduced capacity, with 73% average idle capacity in the crushing plants and 75% idle capacity in the grain ports, as reported by Idigoras. The situation has led to technical maintenance stoppages and a drastic reduction in active production lines.

Idigoras has called on Milei’s government to swiftly eliminate trade restrictions on grains, including taxes, and provide access to foreign currency, as well as to lift export caps and reduce red tape for import licenses. He emphasized the need for an aggressive export policy to address the current challenges faced by the industry.