June 7, 2006

 

Argentina will not limit corn exports, says group

 

 

Agriculture Secretary Miguel Campos has told the Argentine Corn Association that the government will not limit corn exports, the association confirmed Tuesday (Jun 6).

 

The news was welcomed by farmers and exporters who feared that Argentine President Nestor Kirchner would impede exports to increase the local corn supply and keep domestic prices down.

 

Such fears intensified two weeks ago after Kirchner tried to lower bread and flour prices by forcing exporters to "auto-limit" wheat exports. The restrictions on wheat, in turn, came two months after Kirchner banned

beef exports to keep local prices from surging amid soaring domestic and international demand.

 

But the concern over corn exports became so pervasive last week that analysts predicted farmers would plant less corn this season. And this possibility, analysts say, worried Kirchner administration officials who believe that a smaller harvest would likely push prices higher, achieving exactly the opposite effect of what previous export limitations aimed to accomplish.

 

"We talked about all of this with Campos and voiced our concerns about the impact that certain policies might have," Juan Gear, president of the corn association, told Dow Jones Newswires on Tuesday. "Campos said the government has no intention of limiting corn exports. On the contrary, he said they don't want do anything that will hinder the planting of corn."

 

Gear said Campos told him to spread the word and let farmers know they should not worry about new government policies and their impact on the farm sector.

 

"We feel relieved about this and view his comments very positively," Gear said.

 

Concern about government meddling in the private sector, spurred by Kirchner's aggressive efforts to tame inflation by setting price control accords and stifling exports of everything from milk to oil, has created widespread uncertainty throughout Argentina's food industry.

 

This has led many farmers to prefer planting soybeans over other crops. Some have even stopped raising cattle in favour of soybean farming. Soybean exports are taxed at 23.5 percent and are a key source of government revenue. Yet even with high export taxes, soybeans are usually more profitable to produce than any other crop and they now account for more than half of the planted area of all crops in Argentina.

 

This partly explains why Argentina's soybean production has soared to record levels while the production of corn and wheat is down sharply from a year earlier. Indeed, the recent limits on wheat exports are a reaction, in part, to a decision by farmers to plant less wheat because of high export taxes and the crop's comparatively low profit margins.

 

Campos' reassuring comments to the corn association are the first of their kind from a government official since Kirchner began trying to contain food prices by raising taxes or limiting exports. It's not clear if they indicate the government may be reconsidering its approach to controlling food prices, but farm groups say Kirchner admitted late last month for the first time that not all of his policies have been positive.