(Bloomberg) -- Argentina’s Bioceres Crop Solutions Corp. is eyeing an agricultural boom in its home nation as President Javier Milei seeks to deregulate the economy and unleash the free market.

Milei devalued Argentina’s peso by 54% when he took office in December, boosting revenues for farmers whose soybean, corn and wheat sales are linked to the US dollar. The boon increases the likelihood they’ll invest in the seeds, pesticides and fertilizers sold by agribusiness companies like Bioceres.

“There’s a direct increase in farmers’ purchasing power,” Chief Executive Officer Federico Trucco said in an interview. “And when farmers go from a defensive mindset to one where they’re looking to maximize production, they invest in more technology and more precise technology like ours — and we can see that partly reflected in our earnings.”

Bioceres posted quarterly earnings on Thursday after markets closed that topped analysts’ estimates. The company’s US shares jumped as much as 8.9% on Friday in New York, the biggest intraday increase since May, before paring some gains.

Beleaguered Argentine growers plagued by years of heavy taxation, exports meddling and government hostility have supported Milei’s free-market platform in a bid to catch up to rivals in the US and Brazil.

Read More: Down $200 Billion, Argentine Farmers Seek Salvation in Milei

The farmers hoarded harvests over the last few years, betting the government would have to loosen its grip on an exchange rate it tightly controlled to quell fast inflation. The strong peso also hurt corporate balance sheets, including at Bioceres, since sales tied to the US dollar trailed consumer price index-linked salaries and other costs.

The situation on both fronts is improving after Milei’s devaluation, but Trucco nevertheless voiced concern about the exchange rate becoming overvalued again. Monthly inflation in January is estimated to have been around 20% while the central bank’s depreciation of the peso was pegged at just 2%.

“We’re a global company with all our revenues in dollars, but a part of our cost structure is in pesos, so the devaluation has made us more competitive from Argentina,” he said. “Sustaining that competitiveness depends on the advantage created by the devaluation continuing in time and inflation not eroding it over the coming months.”

Argentine agriculture company Cresud SA said it was also optimistic for the Milei era in a Friday earnings call as the peso devaluation and fewer currency controls combine with better weather, bolstering farmer balance sheets across the Pampas growing belt.

“Milei is trying to change many pockets of the country and all kinds of distortions in the market, so we think farmers are going to be much better,” Cresud CEO Alejandro Elsztain said in the call.

Farmer sentiment toward Milei soured slightly after he tried to hike export taxes as he prioritizes balancing the government’s books over other issues. But Bioceres still sees good times ahead for Argentine growers.

“There’s an emotional side to this, which is going from a government that treated you badly to one that treats you a bit better,” Trucco said. “And I believe that a positive mood translates into action: farm-input purchases and planting more acreage.”

More highlights

  • While Bioceres is able to fall back on Argentine patent law to charge farmers royalties for most of its seeds, Trucco said he supports stronger protection for intellectual property rights that Milei proposed in a signature reforms bill that has been shelved in congress
  • Bioceres is still waiting for the US Department of Agriculture to approve its flagship drought-tolerant wheat for planting, part of its efforts to bring the first ever transgenic wheat to global markets
    • “We’ve done everything required of us and we’re just waiting for the USDA to decide. They’ve exceeded the usual timing for this sort of regulatory process. There’s always the possibility that they’ll ask us for more information.”
  • Rollout of drought-tolerant soy is picking up, with acreage expanding in Brazil and a new patent awarded in the US that should protect the technology through 2042

©2024 Bloomberg L.P.