Argentina makes soy dollar 4 official, producers disapprove

Argentina’s government published a decree Tuesday formally announcing its fourth soy dollar scheme in a year, but only after the government denied a preferential exchange rate program would be implemented last Friday.

The new program will be valid until September 30 and is different from the previous editions of the soy dollar, when the government established an exchange rate for buying soybeans.

This one stipulates that crushers can use 25% of their export proceeds in foreign exchange freely, which means using the so-called financial dollar (contado con liquidación, in Spanish) currently worth 754,27 pesos per dollar, or the MEP dollar (Mercado eletrônico de pagos), currently quoted at 680.35 pesos per dollar.

The remaining 75% would be exchanged at the official rate of 350 pesos per dollar, leaving an average of 455 pesos per dollar rate in today’s exchange rate.

The government plans to generate revenues of $2.5 billion by the end of this month.

Tuesday's announcement means essentially that the government has returned to it's original version of the scheme, which was announced by minister and presidential candidate Sergio Massa on August 29.

Last Friday, however, Massa said it would not be a preferential exchange program but an incentive for soybean imports, for which crushers would be allowed to use 25% of their export proceeds to import beans directly without needing to convert it through the official exchange rate.

The decree does not say if purchases must be made in the domestic market or through imports.

According to data from Rosario Grain Exchange (BCR), 7 million mt of soybeans from the 2022/23 crop are available to be traded, while a further 3.9 million mt of soybeans have already been sold with prices yet to be fixed.

The decree also obliges exporters who adhere to the program to exchange the dollars during September but gives them until September 2024 to register the exports, while at the same time obliging them to pay 50% of the export duties in advance.

“Given that the mechanism is new, we will have to wait and see how both exporters and farmers react to the new scheme,” analyst Javier Preciado Patiño told Agricensus.

The measure was not well received by Argentinian producers.

Argentina’s Rural Society SRA said the soy dollar was only beneficial to the industry and the government was “guaranteeing nothing to producers.”

The Confederation of Rural Associations of Buenos Aires and La Pampa (CARBAP) released a statement encouraging producers to negotiate “the minimum necessary to settle commitments” until the market returns to normal conditions.

"We are still waiting for measures that benefit the whole sector and are not to the benefit of some and the detriment of others," Rural Society said in a statement.

The first soy dollar was implemented in September 2022 with a 200 pesos per dollar exchange rate, while the second ran from November to December of last year with a 230 pesos per dollar exchange rate.

Soy dollar 3 was implemented in April 2023 with a 300 pesos per dollar exchange rate and lasted until June 2.