Argentine farmers stockpiling soybeans, reducing global supply

Government trying to work out deal with debt investors

Argentine farmers plan to stockpile soybeans in the second half of 2014 if the country’s government does not work out a deal with debt investors to stave off a new sovereign default.

According to a report, producers already are holding back soy from the market to hedge against high inflation. They say they will be increasingly cautious as negotiations between the government and bond investors near their end.

The holdout bond investors want repayment on bonds that Argentina defaulted on in 2002.

“Considering what’s going on with Argentina’s debt, we are holding onto what we’ve harvested this year, to see what happens,” said Carlos Novecourt, who runs a small farm in Carlos Casares, Buenos Aires province, in the report.

A cut in oilseed supply from Argentina would put pressure on world soybean and soymeal prices as demand rises.

Argentina is the world’s No. 3 soybean exporter and No. 1 supplier of soymeal in countries where diets are shifting away from rice and toward beef, pork and poultry.

Indications on supply uncertainty already are being seen in the global market as soymeal exports from the United States, the world’s No. 3 supplier, are breaking records.

Argentina’s soybean harvest this season is expected to hit 55.5 million tons, according to the Buenos Aires Grains Exchange.

Over the next two months, Argentine growers will sell soybeans to raise cash in order to pay off loans that financed planting. Once the loans are paid, growers will continue to stockpile grain reserves.

“After late August, Argentine farmers will hold onto 23.25 million tons of soy, with a market value of $12 billion. Under normal circumstances, which is to say without the debt restructuring problem, that amount would be 18 million tons, worth $9.3 billion,” farm analyst Pablo Adreani said.