In light of Argentina’s currency devaluation, and on the heels of the U.S. Department of Agriculture’s decision last Friday to delay announcement of 2002 crop loan rates while Congress continues work on a new Farm Bill, the American Soybean Association (ASA) today called on Congress and the Administration to maintain the soybean loan rate at $5.26 per bushel. ASA said that maintaining the loan rate at $5.26 for the 2002 crop, or at a similar level in the new Farm Bill, is needed to temper the negative effects on U.S. soybean growers of devalued competitor currencies and to reduce the loss of soybean market share to South America.

On Friday, Argentina announced that it would devalue the Peso. The Argentine Peso, which had been valued at a one-to-one rate with the U.S. Dollar, is now valued at 1.4 to one U.S. dollar. That means Argentine soybean farmers are now receiving 40 percent more for their soybeans than they were a few days ago.

“The devaluation of the Argentine Peso points again to the need to maintain the $5.26 per bushel soybean loan rate,” said ASA President Bart Ruth, a soybean and corn producer from Rising City, Nebraska. “Argentine soybean farmers, like Brazilian soybean farmers before them, have just received a massive increase in the amount they receive for their production. This devaluation-driven increase in prices received by Argentine farmers will provide new incentives for Argentine farmers to plant more soybeans and will cause Argentine soybeans and soybean products to become even more competitive on the global market.”

ASA believes that the negative impacts on U.S. soybean growers stemming from Argentina’s devaluation will be similar to the negative impacts resulting from the massive devaluation of the Brazilian Real in recent years. As a result of the false production signals being sent by the greatly devalued Real, Brazilian farmers have expanded their harvested soybean area by 31 percent during the period 1996/97 to 2001/02, despite a 40 percent decline in global soybean prices. During this period, Brazil’s share of world soybean trade has climbed from 22 percent to 30 percent, while U.S. share of world soybean trade has declined from 66 percent to 46 percent.

The impact of the devaluation of the Brazilian Real has been to boost the number of Reais that Brazilian farmers receive for their soybeans even as the U.S. Dollar price of soybeans has fallen. In January 1997, soybeans were valued at approximately $7.13 per bushel. At that time, Brazilian soybeans were worth about 7.42 Reais per bushel. Currently, soybeans are selling in the Midwest for approximately $4.25 per bushel -- over 40 percent less than in January 1997. However, at the current exchange rate, the value of soybeans in Brazil is approximately 10.11 Reais per bushel or over 36 percent higher than in January 1997. U.S. farmers are receiving 40 percent less for their soybeans than in 1997, while Brazilian farmers are receiving over 36 percent more.

“With U.S. soybean prices at a 30-year low, the marketing loan is the only income safety net available to oilseed producers,” Ruth said. “Maintaining loan rates at current levels is the only mechanism available today to protect U.S. soybean producers and market share from the effects of devalued currencies of our two biggest competitors.

“World demand for soybeans is growing faster than for any other commodity,” Ruth noted. “The question is, who is going to produce the soybeans needed to satisfy that demand. As Congress writes a new Farm Bill and as the Administration makes decisions on 2002 loan rates, they need to bear in mind that soybean producers in our biggest competitor nations are being provided distorted production incentives through massive currency devaluations. Congress and the Administration need to treat soybeans equitably or else the U.S. will end up forfeiting soybean acres and market share to South America.”