Sharp corn production fall is expected if Argentina defaults on US creditors
Perhaps some of you may be following the crisis involving US creditors and Argentina. Like it or not, this would have consequences on the grain market. Here is part of the story explained: There was an agreement with some creditors and Argentina to receive the debt, but other creditors did not accept to negotiate and a NY arbitration judge decided that Argentina should pay all creditors in 30 days counting from last 26th or the money would be refused. The judge refused a US$ 539 million deposit in a New York bank. Argentina does not want to pay the creditors that want to receive now because at the same point they should the creditors that accepted to negotiate. This contract has US$ 1.3 billion at stake and the country has only about US$ 21 billion of real reserves.
Pablo Fraga, a market analyst from Rosario, told Agriculture.com that he does not think that there is more space to pressure Argentine farmers with taxes or more regulations. They have 32 million tons of soybeans in stocks that would be sold really slowly because of this uncertain economy. But he does not believe the government will intervene even more because it needs measures a little more friendly measures to the market to gain more international credibility. In other words, if Argentina is not friendly to farmers, they are supposed to pay all the debt with the current (and short) reserve and this would push the Argentine Peso against the dollar even lower - creating hyperinflation.
This is not unanimous, however. Juan Rey Kelly, an economist of Argentina Rural Confederations (CRA), said to an Argentine website that the impact of a default would be a sharp reduction of corn areas because of "less access to money". Less credit would result in less technology investment and less productivity. If there is another major currency devaluation, costs would higher and corn is already the most costly crop to grow there. So the scenario is of real uncertainty.
Argentina defaulted in 2001 creating one of the most serious economic crisis in Latin America in decades.
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