ARGENTINA- The world’s largest producer of soybeans, Argentina, is allowing grain exporters to keep 25% of the foreign currency they generate in September to import soybeans, according to a report by Reuters.
This move by the government is inspired by a historic drought that is driving the need for soybean imports.
Because of the drought, the domestic harvest has been cut in half, making it necessary to import soybeans for processing into oil and meal.
While Argentina is the main global exporter of both soybean oil and meal, official data indicates that imports of these commodities are up 700% this year.
Therefore, Agriculture Secretary Juan Jose Bahillo explained that exporters will be allowed to freely dispose of 25% of the foreign currency for 30 days in order to guarantee the purchase of soybeans.
The South American country is facing a complex economic environment, with a large fiscal deficit, scant central bank reserves, triple-digit inflation, and falling economic activity due to the drought that has pummeled the farming sector.
Argentina’s triple-digit inflation is its highest in over three decades, and it could climb to nearly 200% by the end of the year.
Experts provide that Argentina never fully recovered from an economic crisis in 2018 when its peso lost nearly half of its value against the dollar.
Moreover, the pandemic crippled the economy by low GDP growth and low consumer spending.
These, coupled with droughts, have greatly affected the country’s productivity and destroyed key agricultural exports.
Now, grain exporters have to convert all dollars from exports into pesos within a strict time limit and at an officially agreed exchange rate.
Moreover, the government, which has previously offered the farm sector preferential exchange rates to encourage exports, also tightly regulates access to foreign currency to pay for imports.
Argentina has 8 million metric tons of soybeans in reserve, Agriculture Secretary Bahillo estimated, from the 25 million tons harvested in the 2022/23 season, way lower than the 44 million tons collected a year earlier.
The production drop led the country to process 26% fewer soybeans in the first half of the year at just 14.9 million tons, according to the CIARA-CEC Chamber of Exporters and oilseed producers.