Soybeans Rise as Argentina Farm Dispute May Boost U.S. Exports

Feb. 27 (Bloomberg) -- Soybeans rose from a 10-week low on speculation that demand for U.S. supplies will rise as farmers withhold supplies in Argentina, where the government is considering a plan to take over the country’s grain trade.

A proposal for the state to buy and sell grains and oilseeds, to ensure adequate domestic supplies before any export sales, is being studied at “the highest levels,” said a government official who asked not to be named. The possible nationalization of the grain trade threatens to worsen a yearlong conflict with farmers over agricultural policy.

“The Argentina government is trying to kill their best export sector,” said Jerry Gidel, a market analyst for North American Risk Management Services Inc. in Chicago. “Buyers are going to avoid Argentine supplies and that could boost demand for U.S. soybeans.”

Soybean futures for May delivery rose 3.5 cents, or 0.4 percent, to $8.72 a bushel on the Chicago Board of Trade, after earlier falling to a 10-week low at $8.49. The most-active futures gained 1 percent this week, after two straight weekly declines. Still, the price fell 11 percent for February and is down 47 percent from a record $16.3675 on July 3.

Argentina is the world’s third-largest soybean exporter and is the biggest shipper of animal feed and vegetable oil made from the oilseed. The nation’s farmers temporarily halted grain and soybean sales last week to push President Cristina Fernandez de Kirchner’s government to cut export taxes on soybeans, which are as high as 35 percent. Soybean prices have fallen while the worst drought in half a century has hurt Argentina’s crops.

Exports Slowed

“The ongoing strike has slowed export marketing, and the government lives and dies down there on the revenues from export taxes,” said Charlie Sernatinger, a market analyst for Fortis Clearing Americas LLC in Chicago. “All export offers from Argentine dried up completely.”

By raising the possibility of nationalization, the government is pressuring farmers to sell the 7 million metric tons of last year’s soybeans they still hold in storage, Buenos Aires newspaper La Nacion reported today. The sales would provide $1 billion in tax revenue, La Nacion said.

“This move is increasing uncertainty among farmers,” Eduardo Buzzi, head of the Argentine Agrarian Federation, said in a telephone interview from the province of Santa Fe. “The government is wrong if it thinks farmers will sell their produce because, when uncertainty arises, people tend to freeze operations.”

Soybeans are the second-biggest U.S. crop, valued in 2008 at a record $27.4 billion, government figures show. Corn is the biggest at $47.4 billion.