Blue dollar: what can happen before and after the elections

. – It generates something different, the greater devaluation of the peso generates an increase in prices in the economy, which is not combined with salaries that continue to be very low. This impacts the counter of businesses and companies.

Should salaries be increased?

. – The only way for there to be an increase in wages that does not impact higher prices or loss of profitability of companies is for said increases to have as a counterpart an increase in the company’s productivity, something that does not happen on this occasion.

How does the movie continue?

. – The counter offers products that are worth more every day, and the demand does not have the money to validate those higher prices. In conclusion, we are in a recession, less is being sold, and at some point prices will have to drop.

Some example?

. – On August 15, a kilo of a steer in the Cañuelas market was worth $1,000 a kilo. We said that it was not a price that could be sustained over time, since it implied a price per kilo of meat on the counter that a salaried employee could not validate. Last Friday, a kilo of steer in the Cañuelas market was worth $850.

Any examples of sectors that are in decline?

. – We are experiencing closure of pork farms, the cost of a kilo of pork is equal to 2 kilos of soybeans and 5 kilos of corn, this implies a cost of $650 per kilo, in the best scenario they would pay you $560 per kilo, but there are few operations, fluid is $530 per kilo. In recent months we have seen that many farms have closed because they cannot sustain themselves at a loss.

Is something similar going to happen with the dairy farms?

. – Correct, they pay you $107 per liter of milk, but not in cash, some companies pay in 15 days and others in 30 days, this implies that they lose against inflation. The appearance of the corn dollar and the exceptional price for soybeans plays against the dairy farmer, since it increases costs and decreases profitability. In spring we should see an increase in production, but it will be the smallest increase in the last 5 years. Be careful that next year we could see fewer dairy farms in the square.

What about free-range feedlots?

. – Difficult to make money, with a price of wintering at $1,000 per kilo, the price of corn at $70 per kilo, and a price of fat at $850, if we add to this an average inflation of 8.0% monthly If you are not integrated into the chain you lose money.

How do you see agriculture?

. – The prices of wheat, soybeans and corn are not good. From these three products you make money if you plant soybeans, with wheat and corn the margins are very bad. There is a mix of problems that are difficult to solve, the cost of rent is very high, there is a lack of inputs, marketing expenses are very high, the climate continues to be a big unknown. The biggest problem is the low price of corn as of July 2024, which does not encourage planting late corn, since the numbers do not close with a price of US$172 per ton.

Is everything that comes from the field lost?

. – Correct, production is very difficult, you can earn money if you join the chain. The climate problems did not allow the business to scale, the intervention of the State in the sector, the high tax pressure and a late dollar left prices at very depressed levels, to this we must add that the consumer is short of pocket and the limit of The price increase is set by the counter.

Let’s go back to the blue dollar?

. – We don’t see the blue dollar as spicy for now. Companies spent an August with low profitability, today the market is supplied with dollars, banks no longer offer loans at negative interest rates in the face of inflation, which means bank credit is prohibited at current rates.

Without credit you have to take out the joint.

. – Correct, if you don’t sell enough at the counter and credit is expensive, the only way is to sell dollars to finance the problems in the current situation.

Can the blue dollar go below $700?

. – Yes, it can go below that value, it is highly offered in the market. Money is coming in from abroad to cover structural expenses of local businesses.

We see a fall in bonds in pesos

. – Logical, we have been saying it for a long time, bonds with negative rates and banks paying 9.83% annually, was an invitation to sell bonds and be placed in pesos at a fixed rate for 30 days.

Will they continue with the dollar frozen at $350?

. – That price will continue until the elections on October 22, if there is a winner in the first round the dollar price will be adjusted on October 23. If there is no winner in the first round, and the ruling party’s candidate does not advance to the second round, there will be an adjustment on October 23. If there is no winner in the first round, and the ruling party’s candidate goes to the second round, we will have the dollar frozen at $350 until November 19, which is the second round.

Conclusion

. – The devaluation of the wholesale dollar to $350 was not an invitation for exporters to increase the liquidation of exports, or for importers to stop demanding goods and services from abroad.

. – The increase in the wholesale dollar caused an increase in prices that erased the consumer from the counter, sales fell and generated a recessive scenario.

. – Companies have high stocks, few sales, high structural expenses, so offers come, they take financing or they reach for the bucket of dollars. The last one is the most likely of the 3 options. From what can be seen in the market, companies are exchanging dollars to finance the drop in income and expenses.

. – Bond and stock markets are in strong profit taking. Do not buy for now, the decline is like a knife falling from the 40th floor, if you want to grab it you will cut your hand. You have to wait for the market to make a sideways move before taking a position.

. – For those who are bought, the positive scenario for the post-presidential election markets does not change. It is not advisable to go out in the face of these volatilities.

. – On Tuesday we will know the inflation data, if it is higher than 9.83% it will be advisable to make a fixed term adjusted for inflation.

. – The dollar will continue to be offered, for those who are buying long term it is a good opportunity to stockpile. Those who missed the rise in bonds and stocks, you have to be attentive because the market will give you a new opportunity.

. – Companies are not making money, overhead costs are high, consumers have little money, and the counter has few visitors.

. – For those who have excess money, look carefully at the companies that are declining on the stock market, especially energy companies. The decline in sovereign bonds in dollars makes them attractive. Bonds in pesos and those that adjust for inflation look expensive.

.- A note in The Economist can do a lot of damage to the market. We have problems inside here, and we have added problems from outside.