What's behind the recent blue dollar price surge?

[Redpossum]

So is the market functioning? The cow can give you bife ancho only once for a final price of USD 6 per kg, which you can have years of butter which has a final price of USD 14 or so per kg, over twice as much. Are Argentinian farmers all going dairy?

Uhh, dairy cattle and beef cattle are completely separate and distinct. Different breeds entirely.

 

[GMan_27]

Uhh, dairy cattle and beef cattle are completely separate and distinct. Different breeds entirely.

You would think but in reality all those male dairy calves have to go somewhere... Can't get milk from boys. Also cows that dont produce as much milk also have to go somewhere.
In reality the dairy industry supplies about 20% of beef to the industry in USA. I imagine it will be slightly lower in Arg but its still a huge component that is integrated into the beef industry. Source. Source 2.

 

[steveinbsas]

Uhh, dairy cattle and beef cattle are completely separate and distinct. Different breeds entirely.

Bovine cows(f) and bulls(m) are bred (intentionally) to produce different breeds of cattle. The cows of one breed will produce more milk than the cows of other breeds and they become more widely used for this purpose. . All cattle produce beef and that meat can be used to feed other animals, most notably, humans and dogs. They all end up in the packing house.

You would think but in reality all those male dairy calves have to go somewhere... Can't get milk from boys. Also cows that dont produce as much milk also have to go somewhere.

I daresay that relativly few male dairy calves go directly to the packing house or the butcher shop. They are castrated (become steers) and can grow to produce more beef for consumption. If they are not castrated they will become bulls that can be used for breding.

 

[FrankPintor]

From some quick googling (since this is another topic I know nothing about), it seems that a dairy cow would give you about USD 20k of butter and cheese per year, while a beef cow would give you USD 1500 per year, all at the prices indicated by @Redpossum above.

For this simple Gedankenexperiment I'm assuming the economics of maintaining boy and girl cows are similar (in reality, the replacement cost for beef cows should also be taken into account), and people's personal consumption of the products doesn't really matter, since I'm considering only the production end of things. So, what numbers can you come up with?

 

[GMan_27]

I daresay that relativly few male dairy calves go directly to the packing house or the butcher shop. They are castrated (become steers) and can grow to produce more beef for consumption. If they are not castrated they will become bulls that can be used for breding.

Pretty much spot on. Thats what I meant but stated it relatively poorly. They will eventually find their way into the Beef industry though. Most cattle don't die of old age in this industry. They either end up as food for pets or lower grade meat at the end of their lives. Very efficient and minimal waste if you think about it but very factory-like. But thats another conversation.

 

[blarrow]

The blue should go to $1500 to recover the inflation loss of the 1st. quarter.

Needs to hit $1880 to recover the inflation loss from January 24th (if I recall correctly, might have the exact day slightly wrong!)

 

[Reply Guy]

I think of three reasons:

1. Renewed talks about dollarization.
2. A few people who had a cushion of dollars saved for a rainy day are now running out and
3. The recent diplomatic spat with Spain has made people skeptical about the prospects of a speedy recovery.

Disagree with all of this. Few people with dollars under their mattress tapped out or a pissing match btw Spain and Argentina isn't going to move usd/ars

It's mostly about interest rates. Why keep your money parked in pesos when rates are lowering and you can get better risk adjusted return elsewhere?

The harvests usually causes fx movement too, and for a variety of reasons the farmers haven't sold a lot of their harvest yet.

 

[Ronnie Hotdogs]

Looks like when interest rates were high the plazo fijo beat the blue so all the money went to plazo fijo, now the big movers are hedging against inflation with the blue again.

 

[Redpossum]

Disagree with all of this. Few people with dollars under their mattress tapped out or a pissing match btw Spain and Argentina isn't going to move usd/ars

It's mostly about interest rates. Why keep your money parked in pesos when rates are lowering and you can get better risk adjusted return elsewhere?

The harvests usually causes fx movement too, and for a variety of reasons the farmers haven't sold a lot of their harvest yet.

"El Campo" doesn't want to sell the harvest yet because the official dollar is over-valued. They are pressing for an official dollar near 1500, whereas it's currently at 909.

Or at least that's the story I got from my local verdulero.

Interestingly enough, the blue dollar only rose about 0.4% today, after registering gains closer to 5% for the last few days.

 

[Rich One]

The Government may establish a preferential dollar for grain exporters say $1500 , equivalent to a sector devaluation.