Argentina set to boost coffers amid rebound in commodity prices

With soy and maize reaching peaks of US$600 and almost US$300 per ton respectively in Chicago in recent days, Argentina could also look forward to record earnings of almost US$3.2 billion from a promising wheat harvest, whose yield is expected to rise 30 percent in 2021-2022, according to a new report.

Nevertheless, the report by Rosario economists Guido D’Angelo, Emilce Terré and Tomás Rodríguez Zurro warns that "global farm commodity markets cannot escape and uncertainty and worldwide volatility," despite peaks producing the highest prices since 2012, further pointing out "latent risks which could end this rally."

While the commodity boom lasts, the Central Bank reserves of Argentina – the world’s leading exporter of soy-based products but heavily indebted – are at their highest in seven months amid hopes that overseas sales of soybeans, flour and oil will net a record US$20.4 billion, 25 percent higher than last year.

However, the United States 2021-2022 harvest is projecting production increases of 6.5 percent and 5.7 percent for soy and maize respectively, which could bring prices down.

Annual US inflation was measured at 4.6 percent last month, which could weaken the dollar and bring down the real value of export earnings, quite apart from the exchange rate distortions here.

There is also the fear that the Federal Reserve will react to this inflation by backtracking on lax monetary policies and jacking up interest rates, which would suck money away from both commodities and emerging markets.

But last week’s peaks mark year-on-year gains of 88 percent for soy and over 112 percent for maize, the economists note.

Local prices have retreated to US$220 and US$345 from last week’s peaks of US$245 and US$362 for maize and soy respectively but still almost double last year’s levels.

Meanwhile the 2021-2022 wheat harvest is expected to top 20 million tons, especially if the weather is favourable, with estimated yields of 3,100 kilos per hectare. It is estimated that 7.2 million tons of this harvest will suffice for the domestic market, thus leaving 12-13 million tons available for export, says the report.