Fears of a global recession are setting on warnings in Argentina. The Argentine inflation rate increased from 71% in July 2022 and reached a record high of 78.5% in August 2022.
Source: Trading Economics
Argentina’s soybean exports are subject to a 33% tax, which makes them a significant source of tax revenue and foreign currency. However, in the first seven months of 2022, it is reported that the value and volume of Argentine soybean exports fell sharply by 55% YoY and 63% YoY, respectively.
In September, the government set a special exchange rate for soybean exports in efforts to increase soybean sales. The exchange rate for soybean will be 200 pesos per US dollar compared to the official exchange rate of 139 pesos to the US dollar. The new exchange rate under the Exporters Increase Program aims to reduce inflation, narrow the currency gap, encourage exports, and strengthen reserves—all of which are crucial for easing the strain on the Argentine economy.
Before the release of the new exchange rate, producers sold 52.3% of the 44 million mt of soybean harvested in the 2021/22 season until August 2022. After the policy went into effect for two days, Argentine producers sold 2.13 million mt of soybeans, exceeding the 667,000 mt sold in the previous week. Tridge's wholesale price data for Argentine soybean also increased in the first week of September by 35% WoW due to increasing sales. As of W4 Sep-22, 61.8% of the 2021/2022 soybean harvest has been sold.
As for the next Argentine soybean season in 2022/23, if the weather is favorable, production may reach 49.65 mt, a 13% YoY increase. The initiative has been effective, and there is one week until the special exchange rates expire. It is reported that foreign currency has been liquidated to USD 6 billion, equivalent to more than 11.5 million mt of soybeans. This has significantly surpassed the expected sum of USD 5 billion in settlements in September. The Argentine soybean stakeholders are waiting to see how things develop since the government has to decide whether to continue the special rate in the coming month