News ———— Weekly market comment

How Argentina's volatile economy is affecting global food supply

ANTILOOP Market comment

by Anna Svahn —

A few weeks ago, Martín Guzmán, former finance minister of Argentina, resigned as inflation kept rising and the public finances deteriorated, leading to the already devalued ARS falling even harder against the USD. 

The Argentinian government is trying its best to hide the national economic crisis while keeping the money printer going. They have long tried different approaches to force the population to hold and use ARS instead of USD. Among other things, they have made it illegal to buy more than 200 USD per month (at the official rate) and put a cap on how much money people can withdraw from ATMs every week. 

These actions have, of course, not led to the people trusting the Argentinian central bank more, but to the unofficial USD rate (blue rate) to keep rising. Today, the official USDARS rate is around 130, while the blue rate is trading above 300. 

Argentina, the world’s third-biggest soybean producer, is now facing another problem: farmers refuse to export soy as the government only pays the official rate rather than the blue rate. As the Argentinian dollar reserve is shrinking, the government is now deciding whether or not they should seize farmers’ stocked soy to export or if they should create a special exchange rate just for exporting farmers.

Hoarding crops is not a new phenomenon, but something Argentinian farmers have used to hedge against inflation and the volatile economy many times before. However, as the world is already facing a global food shortage, this adds to the issue.