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Newly elected libertarian Argentine President Javier Milei’s government is acting quick on campaign promises. Argentina will cut the value of their Peso by 50% as part of their “shock therapy” to try to rescue their failing economic system. Economy Minister Luis Caputo also announced deep cuts to public spending, government agencies, and energy subsidies
The current inflation rate in Argentina is 150%. Debt is spiraling out of control. Previous Arg governments had kept the Peso artificially high and the devaluation should put the Peso closer to it’s real value.
The reason we are talking about this today is the effect it will have on the Grain & Oilseed markets. Arg corn, soybeans, and wheat will all be much more competitive on the export market. Farmers will likely not sell at first, because it will take time for inflation to come down (and might even get worse before it gets better). Milei did not cut export taxes & tariffs on soybeans. He may keep those tariffs and put a tax of 15% on other grains markets. The initial concern was Arg farmers would flood the global ag markets if the peso was devalued, inflation came under control, and the tariffs were lowered. That does not seem to be the case a the moment. The government needs to reign in inflation, cut spending, and keep revenues high, and tariffs on ag exports are a big revenue generator for Argentina to help pay off their massive debts.
We’ll see how the market reacts today to the news in Argentina but weather in S. America and US/Canada export demand likely continue to be the major determining factors for price discovery.
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