Porto Alegre, April 26, 2021 – Argentina is known worldwide for its high productive performance in the agricultural sector, providing quality raw materials to most countries, but it is also known, unfortunately, for repeating errors or formulas that did not work and, even worse, damaged the country’s agricultural system. The main focus of the measures taken by the Argentine government is the reduction of prices, since they consider that the raw material for its industrialization uses international prices. Moreover, if measures could reduce exports, domestic supply would increase so that prices would fall.
Considering the new measures imposed by the Argentine government (measures that have already been put in place in the past and not generated price losses), the agricultural sector is on alert. It is that every time the Argentine State starts to complain about exports or limitations in the sector’s production, they made new decisions. That is why, analyzing the economic and social situation in Argentina, which is not in a position to borrow money from the world, by not being reliable, has debts, keeps increasing public expenditure and seeing the country’s poverty grow, we believe that government measures that would impact the country’s exports or agricultural sector must continue or even grow. Firstly, due to the government’s price logic and, secondly, due to the increase in export revenue, since international grain prices are at very high values (in case of retention).
The consequences of the government’s statements and measures can already be seen in data from the beginning of the year. Unfortunately, the Argentine agricultural market is already used to this action by the State so that it is safeguarded and take decisions before the restrictions either increase or worsen the export situation. Moreover, the high in grain prices limits the exporters’ selling decisions, although it should also be taken into account that the global market does not seem to have a ceiling, since this increase in prices indicates a constant continuity, mainly due to lack of global stocks. Export declarations of both wheat and corn grew in the current year (note that both commodities have a retention rate of 12%, which may go to 15%. In case the government wants to increase it even further, the issue must be approved by the Congress).
As analysts, we believe that these export declarations will continue to increase because the past has shown us that, as long as the same political current rules Argentina, the measures will increase in quantity and taxation. This position taken by the government, besides economic, is political. Consequently, if Argentine exports are pressured to decline or are directly banned, availability in the world market will be lower, creating a new bullish variable for global grain prices.
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