South America Calling

Argentine farmers view the upcoming soybean and corn season with some trepidation.

Having only sold somewhere around 10% of the 2014-15 soybean crop, they will be forced to market the overwhelming majority of the crop at the near-record low prices forecast for the next year, while local costs continue to rise because of runaway inflation.

"Nobody is making any money when rental costs are taken into account," said Ricardo Negri, chief agronomist at the CREA farm group.

The tight margins mean some marginal land has yet to be rented, although corn planting has already started and soybean planting begins next month, and limited technology will be used in outlying areas.

Most will plant soybeans because they are cheaper. According to CREA data, some 46.5% of all acres planted in 2014-15 will be soybeans, intensifying the oilseeds dominance in rotations over recent years -- a dominance that has led to a rise in weed populations.

But this is Argentina and planting is not the only thing taxing the minds of farmers.

Economic crisis is at the front of everybody's mind.

With international reserves precariously thin, the government's efforts to hold the peso at under 9 to the dollar seem doomed and another devaluation seems likely soon.

The lack of faith in the government's ability to control the rate can be seen in the rush to buy dollars on the black market, where the peso slid to 15.50 to the dollar Monday.

A devaluation during the summer grain season would help farmers, who are paid for their soybeans and corn at prices converted at the official rate.

Negri estimates farmers need a devaluation of about 30% for margins to pull out of negative territory this year. But, of course, the underlying economic crisis would remain.

In a country where inflation is 40%, financial exposure is a worry for farmers. According to CREA, some 48% of farmers will have to finance over 40% of costs.

Despite fears that financing would dry up in 2014, peso-denominated credit lines remains in place, although they cover a smaller proportion of costs because of inflation.

(ES)

© Copyright 2014 DTN/The Progressive Farmer. All rights reserved.