March 28, 2012

 

Argentina's wheat exports to drop by 30%

 

 

The wheat exports of Argentina, a keen price competitor on the global market, are to roll down more than 30% due to a switch to barley, with plantings that will soar to their highest since at the least, 1950s.

 

Argentine farmers will sow four million hectares with wheat for harvest late this year, a fall of some 20% and matching a 35-year low, USDA's bureau in Buenos Aires said.

 

The forecast reflects farmer disillusionment at government restrictions on wheat exports aimed at guaranteeing the country enough of the grain to meet domestic demand.

 

While the government has ditched export quotas in favour of a scheme which reserves seven million tonnes for Argentine consumers, a system it believes will boost domestic wheat prices, "many [farmers] doubt this will be the case this year", the USDA bureau said.

 

"Producers are disorientated and discouraged," believing the protection of local supplies means "prices suffer a significant discount due to the lack of competition between local flour mills and exporters".

 

The decreased acreage should translate into a crop of about 12 million tonnes, and exports of 6.2 million tonnes, the lowest for 17 years, bar the drought-affected result two seasons ago.

 

In 2011-12, the South American country is expected to ship nine million tonnes of wheat.

 

Argentina's wheat supplies are of particular interest in wheat markets given their price competitiveness, signally winning business from Middle Eastern and North African buyers this season, from under the noses of European exporters, despite the extra costs of transporting grain across the Atlantic.

 

In the last tender by Gasc, the state grain buyer for Egypt, the top wheat importing country, two weeks ago Argentine wheat was priced at US$264.45 a tonne, excluding freight, cheaper than Canadian, European and Ukrainian offers, and all but one bid of US soft red winter wheat.

 

Argentine growers will replace wheat in their sowings plans with barley, for which area is expected to soar by one-half to 1.5m hectares, the highest since easily-accessible records begin at the start of the 1960s.

 

"Producers are finding barley a very good alternative to wheat as the government does not intervene in barley marketing," the attaches said.

 

Furthermore, the country, which until recently grew barley largely under contract for brewers, has found good export buyers, in markets such as China, which started to buy from Argentina last year, and the European Union, whose own malting barley crop suffered from a damp harvest.

 

As an extra plus point, barley's shorter growing season gives farmers a better chance of squeezing in a follow-on second crop, probably soy.

 

Indeed, the clamour to grow barley is such that "there are some doubts about the availability of seed", the bureau said, in comments which tally with those of other observers.

 

The Canadian Wheat Board last week forecast that Argentina would "have a sizeable barley crop" in 2012-13.