March 28, 2006

 

Argentina's corn producers fear losing export markets

 

 

Corn farmers and exporters in Argentina are worried about losing market share abroad as traditional clients in South America and the European Union look elsewhere to meet their import needs, the Argentine Corn Association (Maizar) said in a statement issued over the weekend.

 

Argentina is the world's second largest corn exporter behind the US.

 

Argentina's top clients include Algeria, Chile, Egypt, Malaysia, Morocco, Peru, Portugal, Saudi Arabia, Spain and Tunisia. As of Mar 24, Argentina had sold 14 million tonnes of 2004/05 corn for export, Agriculture Secretariat data show.

 

That compares with 11.16 million tonnes sold for export a year earlier. Exports are up because Argentina produced a record 20 million tonnes of corn last year, boosting the supply of corn it could offer for foreign buyers.

 

But this year's harvest is expected to total around 14 million tonnes, down 30 percent from a year ago, due to bad weather and low profitability in the corn sector. As a result, Argentina has much less corn to export this year.

 

Meanwhile, some of Argentina's traditional importers are looking elsewhere to get their corn.

 

In Peru, which recently signed a trade agreement with the US, US farmers are now allowed to ship up to 500,000 tonnes of tariff-free corn to the South American nation. Moreover, that quota will rise 6 percent annually, according to Maizar. At the same time, Argentina, which has exported 11.6 million tonnes of 2004/05 corn to Peru, faces a 12 percent tariff on corn shipments to that country.

 

"As a consequence, we are going to lose a part of that market and in the short term the same is probably going to happen with Colombia and Ecuador," Maizar said.

 

In addition, Western European countries are looking to import more corn from Eastern European nations like Hungary instead of Argentina, Maizar said. Importing from nearby countries who are new members of the EU will save Western European importers money and time, analysts say.

 

"On Saturday, we received information from Argentine exporters saying that the EU has decided to fill (a certain import quota) with 800,000 tonnes of corn from Hungary," Maizar said.

 

Argentina exports corn to around 40 countries. However, that number is bound to decline regardless of changing import rules in other countries, says Pablo Adreani, a grain and oilseed market analyst in Argentina.

 

"If production declines by 7 million tonnes as it has in Argentina, and if the exportable balance falls by the same amount, it's obvious that you're going to lose markets," Adreani said. "We're not going to be able to supply those markets like we did last year. So all this talk of quotas and tariffs is not even really relevant because Argentina just does not have enough corn to export."

 

Adreani said it is natural that European buyers will look increasingly to their own backyard to import grains.

 

"This is logical," he said. "With the entrance of these Eastern European countries into the EU, it becomes cheaper to buy from them. Everyone in the world is looking to buy commodities at the lowest-possible price so importers are naturally going to look for products from their neighbours before they look abroad."