If it quacks like a duck, they say, it might just be a duck. And the Argentine government's latest move to cut the availability of operating loans to the country's soybean producers sure looks like another effort to get them to sell some of the 2013-14 product they've got stashed in storage.
This week's effort to make Argentine producers cut loose of at least enough beans to cover cropping costs comes after such loans through the national bank had already been cut by 10% to 20% last December.
Apparently, that wasn't enough, though.
So why is Buenos Aires so eager to pry open the locks on Argentine producers' bins? Because heavy export taxes on the bean complex go to pay for local infrastructure improvements and pensions. The government, which just went through a default on its international loan obligations, needs that cash.
But it really isn't those whopping 35% export taxes on beans and products, though, that is keeping producers from letting loose of some old product. It's the exchange rate. Bean prices have already fallen, and, to make it worse, farmers have to sell their crop using the ludicrous official exchange rate of just 8.49:1 (the black market rate, uncontrolled by the government, is more like 14.40:1.)
They're waiting for another peso devaluation that might allow them to make at least some kind of profit on bean sales.
Buenos Aires has reportedly told bank branch managers in the Pampas region, according to a news report, to drag their feet processing soybean cropping loans for at least 15 days.
An Argentine bean farmer quoted in a local publication characterized the move as "extortion." Now, I'm sure Argentine President Cristina Fernandez de Kirchner would never use such a term to describe a government simply trying to get its 35% export taxes, plus the big spread between the official and real exchange rates. But, hey, if it quacks like a duck...
The opinions of James Thompson are not necessarily those of Farm Futures or the Penton Farm Progress Group.