Bad agriculture news from the United States drove up all dollar prices

The new crop estimate from the United States Department of Agriculture (USDA) changes the economic scenario in Argentina. The projections have been reduced to 40 million tons of corn and 33 million tons of soybeans and they will negatively influence the price of the alternative dollars and the free dollar which issued an alert yesterday.

The publication of the figures for the United States forced the Stock Exchange to adjust its figures and to forecast 35 million tonnes of corn, against 42.5 million from the previous estimate, and 27 million of soybeans against 34.5 million.

Translated into dollars, the losses can exceed 20,000 million dollars of exports and the damage is 70% greater than that caused by the drought in Mauricio Macri during the 2016/17 campaign, where 8 billion dollars were lost. It should not be forgotten that this loss was the beginning of the end, as the dollar began to rise and the IMF was called upon to mitigate capital flight.

History is repeating itself once again in a crueler way and around the end of the mandate of the current government. “We suffer a double penalty. The core zone is doing very badly in terms of water records and world prices remain low. In other words, production and prices fall,” said Salvador Vitelli, financial analyst and agribusiness expert.

“I think it is not yet clear that this will affect the payment chain from August. We cannot underestimate what will happen, because the scenario is very dark. To make matters worse the situation of producers, the extension of 180 days for shipments between March and July was announced, a measure similar to what was done with wheat from November, which caused its domestic price to fall by 380 USD to USD 300 per ton because it suppressed export demand Early maize prices in March and April will suffer from this measure and drop Producers’ disappointment is great as they thought that given the drop in supply, they would get better prices, but without exporters in the market, they are at the mercy of the domestic market which is content with negligible volume and this poor harvest appears as oversupply,” he added. . .

There is no doubt that the dollarization of portfolios will be encouraged. The investor will not only see the decline in foreign exchange earnings, but also the collapse of tax collection which is fueled by a high percentage of agricultural exports. Issuing to cover pesos that stop entering the Treasury can result in higher inflation and higher alt dollars. In addition, the IMF must be paid $5 billion on the disbursements it makes, to amortize principal and interest. Perhaps this point can be negotiated in the absence of foreign currencies.

The issuance will not affect today’s $7.5 trillion Treasury debt swap with maturities extended to 2024 and 2025, as it is believed there will be 70% acceptance. The controversy centers on how much of this money the private sector will contribute. Few people think that the private proposal covers 15% of the offer.

Local currency bonds added to their pessimism with their prices. The TV24, a bond that adjusts to the variation of the official dollar and which had risen at a rate of more than 1% per day, remained unchanged. Double bonds (adjusted by CER or devaluation) fell slightly and long CER-indexed bonds fell to 0.60%, as happened with TX24 and TX26.

Information to understand the drop in confidence generated by official securities was seen yesterday in the tender for a corporate bond. The Compañía General de Combustibles (CGC) bond received offers for USD 260 million and the company accepted USD 150 million at a rate of -0.25%. In other words, it is a peso bond that adjusts to the value of the official dollar. (linked to the dollar) that at maturity, it will pay the devaluation percentage minus 0.25%. Currency insurance more expensive than what can be obtained with a Treasury bill that yields 3.25% at devaluation, but more reliable for investors who turn to corporate bonds.

The foreign exchange market was more active. $205 million in alt dollars were operated and there were increases in MEP and CCL for the second round in a row. The MEP added $5.89 (+1.6%) and closed at $372.86. Cash with settlement increased by $3.08 (+0.9%) to reach $378.96. The “blue” which had not been affected the day before by the bad news from the United States, recovered $7 and returned to $378.

“Financial dollars have moved above the values ​​desired by the Central Bank and an upward trajectory has been allowed. Cash with liquidation touched $382 and then closed slightly lower. Drought influences. The dollar is an important actor in this serious agricultural crisis and to this is added the proximity of the presidential elections. Investors know there won’t be foreign currencies for everyone and they are starting to dollarize their portfolios as they seem to be causing inflation,” said trader Esteban Monte.

The wholesale dollar, meanwhile, continued its tedious pace of devaluation of 5.9% per month and rose 0.32 cents to $200. The Central Bank had to sacrifice $66 million to serve importers and businesses. Reserves fell by $54 million to $38,266 million.

The bonds paid off yesterday’s debt because they closed ahead of statements by Jerome Powell, the head of the US Federal Reserve. This time they registered declines of up to 2.31%, as was the case with Global 2041. Country risk rose 54 units (+2.6%) to 2,098 basis points.

Stocks rebounded slightly. With transactions for $4,429 million, the S&P Merval, the leading stock market index, rose 1.78% in pesos and 0.9% in dollars.

Companies in ADRs – shareholding certificates listed on the New York Stock Exchange – fell to $7,746 million. The increases predominated and the most favored were the banks. BBVA increased by 6.3%; Macro, 4.7% and Galicia, 4%.

Today’s scenario is not the best. Despite the fact that the wall of Treasuries terms came down, dollar coverage increased due to the worst data from the harvest.