In the first 5 months of 2021, the agribusiness sector contributed foreign currency for USD 13.3 billion

In the first five months of the year, foreign currency settlements reached more than USD 13.3 billion, marking January-May 2021 as a record-setting period for US Dollars entering the Argentine Central Bank reserves, according to data reported by CIARA-CEC.

A very favorable price outlook, accompanied by a slight rebound in the export levels of the soy complex, was the starting point to consolidate this foreign exchange inflow.

On top of this, the excellent settlement levels consolidated during the month of May was not only the best month of the year so far, but the best month in recorded history since the start of the series in 2002. May 2021 totaled more than USD 3,500 million, 82% more than the same month last year. To find similar results for May, although lower than current levels, we must look back to 2013, when the level of foreign exchange settlement reached USD 3.3 billion.

The contribution of agribusiness to the country’s external accounts is essential to ensure stability and economic growth, as well as to have the necessary foreign exchange so that the net importing sectors can make the purchases abroad that they require and settle external accounts. So far this year, the Oilseeds and Cereals sector has been one of the only lines of Argentina’s Central Bank (BCRA) foreign exchange balance with a positive balance of net sales of foreign currency.

This productive and price dynamics of the agro-industrial sector have been fundamental to strengthen the reserves of the Argentine Central Bank. So far this year, the BCRA increased its reserves by USD 2,463 million, which represents a 6.2% rise in gross reserves. In a context where macroeconomic stability is essential to underpin the recovery, agribusiness makes an enormous contribution to the macroeconomy in its role of chief export sector.

For its part, the tonnage exported between the different agro-industrial complexes totals about 43 Mil MT, a reduction of 13% if we compare the first five months of 2021 with the same period last year. However, within the complexes, there are divergences in the evolution of their exported quantities.

On the one hand, the Soy complex adds more than 16.6 Mil MT among its different products, which translates to an interannual increase of 5%. The positive trend is accompanied by the barley complex, rising by more than 20%, with shipments of about 2 Mil MT. However, so far this year there has been a noticeable fall in the export quantities of Maize and Wheat complexes, of 15% and 27 % respectively, totaling exports of 13 Mil MT and 6.2 Mil MT, respectively. For these last two, the lack of adequate rains to boost wheat yields at critical moments of development, as well as to ensure good planting conditions of early/first-crop maize, led to a notable drop in the harvest of these varieties.

Indeed, according to official information, to date, 48% of the target area of ​​maize has been harvested, considerably below the 67% achieved at this point in the previous year. As mentioned in previous reports, this season a larger area of ​​late maize was planted and the vast majority of the lots that remain to be harvested correspond to this category.
At the same time, progress is already being made with what will be the 2021/22 wheat plantings, which will be released to market around the end of 2021. According to the projections of the Strategic Guide for Agriculture, this year 6.7 Mil HA will be sown, of which progress was made on 17% of the area, considerably behind the 30% reached this point in the previous year. However, if we consider that the average of the last five years was 18%, we can see that the current situation is in line with the norm.

There is something that sets this campaign apart from the previous one, and that is that, at least at the beginning of the sowings, the conditions are practically unbeatable. The levels of soil moisture range from adequate to optimal in most of the productive regions of our country, with only some specific regions showing excesses and other regular reserves.

­However, if we observe what happened a year ago when the 2020/21 sowing began, we see that at that time the water reserves were presented as regular in most of the area, with only some regions in the south of the province of Buenos Aires presenting adequate levels of water in the last meter of soil. It should be remembered that this region was precisely the only one that obtained a productive figure above the previous year since the central and northern regions of the country suffered a production decline compared to 2019/20. In this way, and at least in this first stage, the conditions are ideal for Argentine wheat production to exceed 20 Mil Mt for the first time in history.

In terms of prices, values reached their peak in May, starting to decline from there on. In the case of SB, the reference price of the CAC Rosario converted to dollars according to the exchange rate of the buyer’s currency Nation reached more than USD 360/MT in mid-May, although after the euphoria, it began showing a downward and negative trend, and today it is trading around USD 335/MT. Even so, this price level represents an increase of 1.75% if we compare current prices with those we found at the beginning of last month.

Meanwhile, maize and wheat showed falling prices in May. Wheat accompanied the euphoria in the middle of the month, reaching USD 230/MT, and then falling to current levels at around USD 219/MT. However, the drop in corn was more pronounced if we compare the first days of June with those of May. After breaking the barrier of USD 240/MT, maize showed a marked decline and today is trading around USD 208/MT, dropping more than 5% last month.

As for international prices, in June they began to partially recover the losses of the previous month in the context of climatic concerns. The drought that hit Brazil in the middle planting season of second-crop maize (safrinha) seems to find no end, diminishing the yield potential in a considerable portion of the planted area.

Likewise, in the United States, the sowing of maize and wheat should be completed in the coming days. The good / excellent condition of winter wheat is three points below last year’s values. The situation is even worse for spring wheat, 37% below the previous year. This could serve as benchmark for international cereal prices in the short and medium-term. As for maize, the scenario was much bleaker at the start of the survey, compared to what was eventually informed, thus limiting the potential of prices to recover. However, the weather forecast in North America calls for 15 days of hot and dry conditions, raising concerns that water needs will worsen. At the same time, the outlook of a robust global demand reinforces international dynamics and supports current prices.

Source: https://bcr.com.ar/

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