Argentina’s peso has remained mostly stable since the end of March, but in the past few days, the country’s central bank (BRCA) has allowed it to start weakening again. This follows a steady reduction in interest rates that’s been ongoing for the last month, which now stands 26.9%, far below the inflation rate, which most analysts believe is close to 40%.
It’s thought that Argentina will once again try to patch things up by devaluing the peso even further. This in turn will likely lead to the familiar scenario of farmers holding onto their crops as a hedge against the anticipated devaluation of the currency. Hence the thought of fewer soybeans and particularly less soymeal being available to the US or the rest of the world.I should also note the Argentine harvest of both corn and soybeans is running 20-25% behind last years pace and is adding to the excitement.
Bottom-line, take a big chunk of the Argentine soybean production out of the equation and global ending stocks immediately go from a large surplus to a more concerning situation.