March 27, 2007

 

Argentina's wheat area seen down sharply on government intervention

 

 

With the start Argentina's 2007/08 wheat planting season just weeks away, the area dedicated to wheat is expected to be down sharply this year due to government intervention and increased fertiliser costs, according to farmers.

 

"Wheat planting will likely be down 10-20 percent because we've been ransomed by the political winds of this government and the lack of predictability," said Sean Cameron, president of the Argentine wheat growers association, Aaprotrigo.

 

"On my farm, I'm going to plant 25 percent less wheat this year," Cameron said.

 

This month Argentina suspended the wheat export registry in an effort to ensure domestic supply and keep down local bread and pasta prices. In November, the Secretariat closed the export registry for corn in the face of surging export declarations.

 

"The commercialisation of wheat continues to be very complicated and distorted," said Agropuerto in its weekly report.

 

Soaring fertiliser costs and the high sale price of other crops such as corn and soy will also push a shift away from wheat, according to analysts.

 

"Fertiliser prices climbed 30-35 percent this year," Cameron said.

 

Argentina produced 14 million tonnes of wheat from the 2006/07 crop, but output from the 2007/08 crop could fall to 11 million tonnes, Cameron said.

 

With domestic consumption estimated at 5 million tonnes, there are not expected to be shortages, but exports will fall sharply, he said.

 

Brazil is Argentina's principal market for wheat and wheat flour due to the decreased shipping costs between the neighbouring countries.

 

"Mercosur might be wheat deficient next year" and need to import from outside of the region, Cameron said.

 

The southern Cone Common Market (Mercosur) trade block includes Brazil, Argentina, Venezuela, Uruguay and Paraguay.

 

The government has stepped into agricultural markets with a heavy hand repeatedly over the past year to rein in domestic prices in farm goods, implementing export limits and forcing market players into agreements designed to slow price gains in food, a key element of the inflation index.

 

However, the government has been slow to implement the wheat subsidy programme, and just recently made the first payments to millers.

 

"Broken promises, subsidies which have not been paid and a flood of regulations to see if one will get back a peso have exhausted even the most organised," said Roagro analyst Javier Cabanellas.

 

Tension between the government and agricultural groups is high, with farmers staging two nationwide strikes last year in protest over repeated intervention in the grain and beef markets.

 

In February, the government replaced Agriculture Secretary Miguel Campos with his former undersecretary, Javier de Urquiza, a rancher from President Nestor Kirchner's home province of Santa Cruz.

 

While relations thawed for a time due to the shift, farm groups reacted angrily to the new freeze on wheat exports. Leading farm groups have said that a new strike will be considered if the government does not address their concerns this week.