I don't write a lot about some of Brazil's wacky neighbors. For example, this blog isn't about how Brazilians living near Venezuela load their cars with jugs of gasoline bought at Caracas' subsidized price of about 7½ cents per gallon and return home to sell it for a huge profit. Nor is this space dedicated to Argentina with all its serial port strikes, soybean export taxes, ludicrous official exchange rates and official inflation assessments. Sometimes you wonder how the bureaucrats who push the data can manage to keep a straight face.
But I can't pass on the latest from down south.
Just as Argentine farmers are getting set to plant their 2014-15 crops, the federal legislature in Buenos Aires passed The Supply Law. This piece of legislation allows the administration to force the sale of the estimated 27 million tonnes of last season's Argentine soybeans that have not yet been sold.
Considering total Argentine 2013-14 production was about 53 million tonnes, that's a lot of unsold beans.
In fact, Argentine producers are sitting on an estimated $10 billion in soybeans, much of it in big plastic bags. They're selling just enough to pay bills until their government gets real about the exchange rate—given that beans have to be sold at using the official rate of 8.4 pesos per dollar when the far more realistic black market rate it more like 15¾:1.
Now soybeans are money, and the Argentine administration could really make use of a few bucks right about now. For one thing, they can tax just about all those soybeans at 35% once they're exported. And that would go a long way toward meeting the country's obligations with world bankers.
Argentine Ag groups have been falling over one another to file suit against the new legislation. But, at least for now, it's the law of the land.
That said, those estimated $10 billion of Argentine beans may not be dumped onto the market by tomorrow's closing bell, further dragging an already downward price trend. After all, government functionaries are going to have to find all those beans before they can force the sale of the commodity.
In Argentina's wild world of ag policy, that could take a long time indeed.
The opinions of James Thompson are not necessarily those of Farm Futures or the Penton Farm Progress Group.