Argentine farmers stall soy sales over murky FX outlook

By Maximilian Heath

BUENOS AIRES (Reuters) - Argentine farmers are selling their soy crop at the slowest pace in 10 years as producers in the South American country bet on a likely weakening of the peso currency and potential tax relief from the government of libertarian President Javier Milei.

The latest government data show that farmers in Argentina, the world's largest exporter of soybean oil and meal, had sold 8.4 million tons of 2024/25 soybeans as of March 19, equivalent to between 17.3%-18.1% of the expected harvest.

That marked the slowest pace since the 2014/15 season when 15.7% of the soy harvest was sold at the same time of the year. The sales are a quarter below where they were last year.

"Producers are selling only what they need to cover their expenses. It's another year when they are waiting to see what happens later, especially with the exchange rate," said Pedro Jaquelin, a farmer from the grains hub town of Pergamino.

Argentine traders have been placing bets on a faster devaluation of the peso currency ahead of an expected $20 billion loan deal with the International Monetary Fund. Peso futures have spiked since the middle of the month.

Local farmers' crops are priced in dollars, but they receive the peso equivalent, meaning a weaker peso would give them more local currency, an incentive to hold onto their crops.

"The uncertainty and the numbers don't add up. Producers are waiting to see a change," said Jaquelin, who is also president of the rural society of Pergamino in Buenos Aires province.

The slower soybean sales are a worry for Milei, whose government needs dollars to help stabilize the local peso. Soy is the country's main source of foreign currency, mainly through exports of processed soy oil and meal.

Argentina's peso is currently at 1,070 per dollar, though a June futures contract spiked to near 1,200 per dollar in recent weeks. The government has moved to play down talk of a potential devaluation.

Farmers also said that they were watching tax rates on soy exports, currently at 26% and 24.5% for soybeans and their derived oil and meal respectively. Some producers hope that Milei will follow through on pledges to cut these further after a temporary reduction until June.

"The idea in producers' heads is that if they already lowered them once, why wouldn't they lower them again?" said Ricardo Bergmann, vice president of soy chamber AcSoja.

The farmer from Monte Buey in central Córdoba province, added there are several bills in the committee phase in Congress that aimed to reduce these taxes, in a year in which Milei will try to consolidate his power in the October midterm elections.

WEATHER AND CORN

The delay in soybean sales is also linked to adverse weather that hit Argentine farmers at different spells of the 2024/25 campaign, earlier during planting last year and a tough drought in January-February that made producers more cautious.

Heavy rains that fell in the second half of February, however, allayed fears about the drought impact and have helped spur a strong early corn crop. Farmers said they have been focused more on corn sales, taking advantage of stronger prices.

"More early corn is being harvested, and it's arriving now. Producers are choosing to sell more corn," said Rosario-based agricultural analyst Lorena D'Angelo.

Meanwhile, the chamber of grain exporters and processors CIARA-CEC noted that due to the slower pace of sales, local crushers have increased trade with Paraguayan farmers, who send their goods to Rosario factories by barge on the Paraná River.

(Reporting by Maximilian Heath; Editing by Adam Jourdan and Sandra Maler)