Argentina corn exporters face "negative margin" as FAS price jumps

Corn exporters in Argentina face a tough situation securing enough corn to supply their existing export contracts as farmers across the country are holding on to their production leaving domestic prices to firm rapidly, trade sources in the country have told Agricensus.

Farmers have been slow sellers in recent weeks, as they expect higher to see prices rise on the back of higher inflation and along with demand from exporters that need to cover their contracts.

That combination has already pushed the domestic FAS price higher than itys FOB basis equivalent, leaving exporters to face what's known as a "counter-margin".

In that situation, an exporter's potential margin is reduced or could even turn negative.

"Exporters are facing negative back-to-back margins in the origination... replacement levels are around 100 cents over U (the September contract) currently," one Argentina-based source said.

For now, the FAS price that exporters are paying is around $140/mt for corn in Up River ports, with fobbing costs at around $11/mt.

That together with 12% export tax, that also should be included into FOB price means that the FOB equivalent to the domestic price stands at around $170/mt FOB.

"Exporters pay the tax with their export declarations... it of course impacts the FAS price farmers get... but when you calculate the FOB price you need to add it to the FAS price," a broker said.

Agricensus assessed the corn price for September loading at $163.50/mt FOB Upriver yesterday.

Earlier this week, the Rosario Grain Exchange (BCR) reported that corn output for the 2019/20 marketing year reached 51.5 million mt, while the industry and the export sector had acquired a total of 32.7 million mt of corn by the end of June.

That means that corn supply is getting tighter, while market sources expect August shipments to reach 4 million mt, with line up data showing 2.4 million mt is set to be exported just in the second half of August.