Aug. 9, 2022
Farmers in Argentine are preparing to start planning their 2022/23 crops, but they are doing so under a dark cloud of economic uncertainty. Inflation is currently running at approximately 70%, but it is expected to increase to 90% by the end of the year according to analysts surveyed by the Argentine Central Bank. Interest rates were recently increased 8% to 60%. The official exchange rate of the Argentine peso is about half the black-market rate and the devaluation of the peso has not kept pace with inflation.
These economic uncertainties have convinced farmers to hold tight to their 2021/22 grain production because grain is their "money in the bank" and a hedge against inflation. Farmers will continue to be slow sellers as they wait for more clarity on government monetary policy and an anticipated devaluation of the currency.
The cost of planting their summer crops is going to increase due to higher prices for fertilizers, chemicals, and diesel fuel which have been aggravated by the conflict between Russia and Ukraine. In recent months, diesel fuel has been in short supply, which led to periodic work stoppages by truck drivers.
To cap it off, Argentina has a new "super minister," Sergio Massa, who will now oversee the economy and agriculture. Many observers view him as a political opportunist who took the thankless job as economic minister to further his presidential ambitions.
On his first day in office last Friday, the left-leaning ex-congressional leader introduced a series of austerity measures designed to curtail the government's deficit spending. Massa is the third economic minister appointed by President Alberto Fernandez over the past month and it remains to be seen if he will have the wherewithal to stop the economic bleeding in Argentina.
The agricultural community and the Argentine government have always had a contentious relationship. Farmers and ranchers contend that they are the one bright spot in the economy, but the federal government has interfered with agricultural exports and heavily taxed commodities that are allowed to leave the country. None of this bodes well for farmers who are preparing to plant their 2022/23 crops.