January 9, 2012

Argentina relaxes restrictions on wheat exports

In a concession to farmers who say the outgoing permitting system forced them to sell their grain at a steep discount, Argentinean government has formally agreed to ease restrictions on wheat exports.

"This mechanism protects the first seven million tonnes that Argentina needs for domestic consumption. All of the rest is available to producers who can sell it as they see fit," Agriculture Minister Norberto Yauhar said in a press conference late Thursday (Jan 5) afternoon.

Argentina tightly regulates corn and wheat exports to keep local food prices low, with the government issuing export permits only when it decides that enough grain has been set aside to meet domestic demand.

Argentina is the world's No. two corn exporter and a major supplier of wheat to neighbouring Brazil. Yauhar said the new system is the product of negotiations between the government and farm groups. "An agreement was reached that satisfies everybody."

Under the new permitting system, the government will conduct a preliminary survey of wheat stocks January 31 of each year, at which time it will authorise some exports. All excess stocks will be eligible for export once a final survey is completed in February.

The Buenos Aires Cereals Exchange on Thursday raised its forecast for the 2011-12 wheat harvest to 14 million tonnes, an increase of 400,000 tonnes from its previous estimate. So far, farmers have finished about 93% of the harvest, which ends later this month.

Exports of soy, corn, wheat and related products like soyoil are Argentina's main source of hard currency and a major source of taxes. Export taxes, mainly on grains, accounted for 10% of the federal government's ARS540 billion (US$125 billion) in total tax revenue in 2011. Farmers have long complained that the old system of issuing export permits in a handful of tranches throughout the year stifled competition between exporters and local buyers.

Critics say those regulations have also stunted the futures market and forced farmers to sell their crops on the spot market or bear the expense of storing the grains. President Cristina Kirchner, who was sworn in for a second term last month after winning re-election with 54% of the vote, went to great lengths to mend fences with farmers in the run up to the election. In 2008, Kirchner faced a rebellion by rich and poor farmers who blocked highways to protest her attempt to raise taxes on grain producers.

High global prices for soy and grains have also helped to smooth over the lingering resentment between the Kirchner administration and farm groups.