How Much of Argentina’s Corn Harvest Will Hit the International Market?

The South American corn crop is all but harvested in both Brazil and neighboring Argentina. The Argentine corn crop was 98 percent harvested a week ago. Dr. Michael Cordonnier is an agronomist with Soybean and Corn Advisors, Inc. The big question about Argentina’s corn crop is how much of it will get into the international market.

“Farmers in Argentina are not very well capitalized. They’re very slow sellers. They’re holding on to last year’s crops as much as they can as a hedge against inflation, which could be approaching 90 percent by the end of the year, so they want to hold, hold, and hold until there’s a devaluation of the peso, which everybody expects will come because the peso has devalued at a slower rate than inflation. So, at some point, it’s got to catch up to inflation. So, there’s got to be some big devaluation in the future, and the farmers want to wait until that happens before they sell.”

As a result of the situation, farmers in Argentina will likely grow more soybeans in the upcoming season.

“Soybeans are cheaper to grow, so they want to go cheap as they can, which is soybeans versus corn. And also, the Argentine government, in the past, has used corn as a weapon against domestic food inflation, and here’s how it works: They would limit how much corn is allowed to be exported, so there’ll be a glut of corn domestically, driving down the price of corn domestically which is what the goal is, And then, feed costs go down, then the price of meat in the supermarket doesn’t go up quite as much as what it could be, so they use corn as a way to control domestic food inflation.”

Cordonnier says there’s a financial advantage for Argentina farmers to grow soybeans, even with a hefty export tax.

“There’s no point holding soybeans in the country. It doesn’t help domestic food inflation because soybeans aren’t used very much for the domestic livestock industry. Another reason why they want to try to cut back on corn is because they want to try to go for the crop that has the best chance of being exported, which is soybeans, even though the export tax on soybeans is 33 percent. So, they hate that tax, but you can at least export the soybeans. You may not be able to export to corn, at least, not very much.”