Russia’s war in Ukraine has sent grain prices skyrocketing — a worry for consumers worldwide, but potentially a boon for producers such as Argentina, which hopes an influx of soybean “agridollars” will boost its faltering economy.
South America’s third-largest economy is the biggest exporter of soybean meal and oil in the world, and only the US and Brazil export more soybean grains.
Soy represents nearly one-third of Argentina’s exports and last year contributed US$9 billion to the state coffers.
This year, the sector is expecting record sales of US$23.7 billion — about US$700 million more than a year earlier — despite a 10 percent smaller harvest due to a severe drought.
“The prospects for the producer are good... There is optimism,” said Martin Semino, who sells farming equipment and presides over the Rural Society of Lobos, a fertile agricultural zone southwest of Buenos Aires.
The harvest season is at its height, and workers are laboring from dawn to dusk to clear the fields before the autumn rains arrive.
“Soy is the dollar, the currency of the countryside,” Semino said.
In the past, the grain has been a savior for inflation-troubled Argentina.
A soybean boom in the 2000s is widely considered to have helped the country recover from its worst economic crisis in 2001. In the past 40 years, the planted surface area of soy has multiplied 14 times.
Argentina is also a major producer of sunflower oil and wheat — other grains affected by the war in Ukraine.
After a record sunflower harvest of 3.4 million tonnes in the 2021-2022 season, the area under cultivation is set to increase by 17 percent this season to 2 million hectares.
The country also had a record wheat harvest this season.
Argentina’s agroindustrial exports are this year estimated to bring in a record US$41 billion — about US$3 billion more than last year.
“With prices close to historic records, Argentina, which always needs dollars, must seize the moment,” Rosario Stock Exchange analyst Tomas Rodriguez Zurro said.
However, the rise in prices “is temporary, it will end when the war is over,” he said.
Yet some say that Argentina could have reaped an even larger benefit if it were not for rising input costs.
Argentina imports about 60 percent of the fertilizers needed to grow food — about 15 percent of it from Russia — but supplies are now short and prices climbing, meaning lower yields.
Higher fuel prices are also taking a toll, set against the backdrop of soaring consumer inflation of about 60 percent projected this year for Argentina.
The oilseed industry and grain exporters chambers have said that rising input costs — as well as shortages of fuel and fertilizer — have “neutralized, or worse, the relative benefits” derived from the commodity price rise.
“Input costs have exploded with the war,” Semino said.
Last month, farmers staged a protest in Buenos Aires to express their ire at government plans to impose a windfall tax on products boosted by the war in Ukraine.
The tax, imposed only on those earning more than 1 billion pesos (US$8.6 million) in net profit for the 2021-2022 season, would be used to cushion inflationary shocks for the poor.
Argentina has a 37 percent poverty rate.
The government has introduced quotas on wheat and maize, the latter of which Argentina is the world’s second-largest exporter of.
It has also announced a so-called “wheat stabilization fund” seeking to ensure that the price of the staple grain — and hence bread — remains shielded from steep fluctuations.
‧Gold for June delivery rose US$7.10 to US$1,882.80 an ounce, down 1.51 percent weekly.
‧Silver for July delivery fell US$0.07 to US$22.37 an ounce, dropping 3.12 percent from a week earlier, while July copper fell US$0.02 to US$4.27 a pound — a weekly decline of 3.17 percent.
Additional reporting by AP
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