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Honored Advisor

Re: This Reporter's Notebook

Not sure I would say that nobody cares that corn prices are low......Consumers are ready for the lower food prices that are sure to follow.........                          yeh.......right.

 

 

BTW, Where are all these people that screamed that high corn prices raised the price of food?    They should be screaming louder than ever now.  Obviously,  lower corn prices do not mean lower food prices.

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Veteran Advisor

Re: This Reporter's Notebook

Makes one wonder who was really doing the yelling, doesn't it? I guess the consumer didn't riot in the streets because of the food prices, so I guess it was OK after all.

Jen

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Contributor

Re: This Reporter's Notebook

Well Mike, I thought talking about it would make the post too long. But, now that you're asking...

 

The last couple of years, farmers have held as much of their production as they could afford to, once they had paid their debts. Soybean is considered the easiest crop to store and to sell, hence, most people kept soy.

 

Regarding your question, yes, land owners tend to hold most of the crop that is yet to be sold. That being said, farmers who work the land but don't own it, might still be holding a large amount of beans in farms, either where they still have contracts to rent and/or where they know they'll rent this year. Besides, many farmers renting land also have their own farms, where they can store production from other places. 

Silo bags have become as common as steel silos (maybe even more), making it easier to store the grains, with less investment.

The fact that land owners, own a bigger share of the stocks, decreses the chances of selling, because they have less financial needs than comercial producers.

This is no official statistic, but I think we started this harvest with 3M o 4M tons of soy unsold from 12/13.

This year, with a 55M tons production and only 33M sold this far, we'll probably have ending stocks of 4M to 6M tons (could be a bit more if prices fall further). 

 

Finally, the last, and hardest to answer, question: when are those 25M tons going to be sold? 

I think the answer has more to do with psychology than with economics. Those who have the beans, being farmers or land owners, keep them for the same reasons.

There's 2 main aspects to consider: devaluation and politics (there are many more, but I think these are the most important).

Most of the stocks will be sold in the next 6 months, as financial needs push producers to sell, holding to their last breath before they sell.

For the rest of those stocks, like I said, farmers know first and foremost about grains. So, they see soybeans as a way to hold their wealth and hedge themselves from devaluation, because commodities are dollar-linked goods. It doesn't matter so much if they could do the same with bonds or other assests, they prefer to hold what they are familiar with. They held soybeans when it lost 65u$s in the last few months. That's why I think it became a matter of being right and selling when a devaluation comes.

Politics also have to do with this. Many farmers ain't friends with goverment (and viceversa). And if the goverment really needs something, that'd be gaining dollars from exports. Producers who hold a grudge with the goverment will probably wait as much as they can before selling their grains and allowing the goverment to access more dollars.

 

To conclude, unless there's abig recovery in prices, you need to devaluate the peso or present a different political approach to change the mind of producers and see those stocks coming into play... or you could just present a law that allows the goverment to expropiate goods being held if it considers that stocking is damaging to society... like the one our congress approved this week. That'd also work. Smiley Frustrated (there's no real knowledge if how this law would be imposed).

 

Sorry if this was a bit long, but I'm not sure if it is possible to clarify our situation with less words.

Us argentinians are difficult to understand, I think.

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