Argentina unveils third 'soybean dollar' program to boost farmer sales

Argentina has reintroduced a special foreign exchange rate for soybean exporters in a bid to boost shipments, raise the central bank's reserves and increase farmer sales, the the Ministry of Economics said April 5.

The new scheme repeats the mechanism that had already been used in September and November, allowing access to a differential dollar price.

The scheme valid from April 8-May 31 allows local exporters to accomplish their sales from soybean complex at a rate of Peso 300/$1, almost 40% above the current official rate.

"We have to face the worst drought in Argentine history," Economy Minister Sergio Massa said. "When one looks at the records, one finds the latest records in 1922 and does not find, from the point of view of comparative climatic and productive impact, that can show us situations similar to the one we are experiencing."

Massa also said the program, known locally as the "soy plan," will cover small farmers in regional economies.

The drought-hit Argentina's soybean crop harvest in the marketing year 2022-23 (April 2023-March 2024) has been forecast at 25 million mt, nearly 25 million mt lower than the early-season expectations, according to the Buenos Aires Grains Exchange.

With sharp reduction in harvest prospects, the world's third-largest soybean supplier is expected to import a record volume of nearly 10 million mt in MY 2022-23, analysts said.

Argentina is the world's top exporter of soybean meal and oil, and the previous "soybean dollar" has increased the flow of foreign currency to the depleted cash reserve nation in the past. According to the market sources the new policy will lead to an increase of $15 billion dollars in soybean exports between the second and third quarter of 2023.

The first soybean exchange regime was valid between Sept. 5 -30, which operated at a currency settlement level of Peso 200/$1. This generated a traded volume of almost 14 million mt of sales from soybean complex, leading to a foreign currency for more than $8,000 million during its term of validity.

According to market participants in Argentina, the new currency exchange policy came as expected and was likely to support local farmer sales. By March 29, only 5.48 million mt of soybeans for the 2022-23 marketing year had been negotiated in the country, from nearly 12 million mt by the same time last season, official data has showed.

Despite the formal announcement, sources also showed some reluctance while all details weren't published in the official Argentinian gazette.

"We will need to check the small words tomorrow," a producer said.