June 5, 2009

Argentine wheat prices were up on the week at the Rosario Grain Exchange Thursday (June 4) on demand from exporters and signs that wheat planting will fall sharply during the 2009-10 season.

Spot wheat wasn't traded in Rosario on Thursday but sold at ARS608 (US$163) a tonne Wednesday, up from ARS582 last Thursday.

December 2009 wheat traded for US$150 a tonne on Thursday, up from US$140 a tonne last week.

Argentine grain exporters have already bought 680,000 tonnes of 2008-09 wheat at full market price under an agreement with the government reached last month to purchase one million tonnes, the grain exporter centre CEC said Friday.

On May 4, President Cristina Fernandez announced a deal under which exporters agreed to buy one million tonnes of old crop wheat at full price, which is the theoretical Free-Alongside-Ship price minus the 23 percent export tax. Exporters will then have to sell that wheat back to local millers at market price. In exchange, the exporters will be guaranteed 1 million tonnes of 2009-10 wheat available for export.

Local prices jumped over 20 percent following the agreement, with exporters back in the long-dormant wheat market. The plan is designed to stimulate more wheat planting in the face of signs that 2009-10 production will be down sharply due to drought.

Farmers also complain that continued government intervention in wheat markets have depressed prices and spurred a shift away from the crop. The government tightly controls exports to ensure domestic supply and keep down local food prices.

Argentina's 2009-10 wheat planting will plunge to just 3.2 million hectares (7.9 million acres), down 30 perent on the year and the smallest amount planted since records have been kept, the Buenos Aires Cereals Exchange said Wednesday.

The new forecast is down 13.5 percent from the exchange's forecast last week.

In addition, with soil moisture levels still low despite recent rainfall, planted area may fall even further than the current estimate, the exchange said.

Very little new crop wheat is likely to be available for export from the 2009-10 crop, as the government will only authorize exports once about 7 million tonnes are set aside for domestic consumption.

Soy prices were steady on the week in Rosario, with local prices tracking the sharp drop Wednesday and rebound Thursday.

Low stocks are fuelling volatility in soy prices, said Roagro analyst Pedro Amuchastegui in a market note.

Spot soy were traded at between ARS1,025 and ARS1,040 per tonne at the Rosario Grain Exchange Thursday, up from between ARS1,010 and ARS1,040 a week ago.

May 2010 soy futures traded at US$240 a tonne in Rosario Thursday. Soy futures weren't traded last Thursday.

With virtually all of the harvest complete, Argentina's 2008-09 soy crop totals 32 million tonnes, according to the Buenos Aires Cereals Exchange said Wednesday.

Early in the season, analysts had expected output to approach 50 million tonnes, but drought caused yields to fall sharply.

Some see the losses as even more severe. The Argentine Rural Confederation or CRA forecasts production of just 30.5 million tonnes.

Exporters bought spot corn for ARS390 and ARS400 per ton Thursday, up from ARS380 a week ago.

March 2010 corn traded at US$120 a tonne, down from US$125 a week ago.