June 29, 2009

Argentina may cease wheat exports

Argentina, the world's fourth largest wheat exporter last year, may withdraw from world markets for the first time as drought reduces plantings.

Continued dry weather until September will probably cut the 2009-10 harvest to as little as six million tonnes, down 28 percent from the previous year and equal to the amount consumed by local millers, said an economist at the Buenos Aires Cereals Exchange.

Argentina exported 11.2 million tonnes of wheat last year, and is expected to ship 4.5 million tonnes this year, according to the USDA. Current crop production will be delivered in 2010.

The absence of Argentina in the world markets would force neighbouring Brazil to purchase as much as three million tonnes outside South America, said Lawrence Pih, CEO of Sao Paulo-based miller Moinho Pacifico SA.

Brazil buys as much as five million tonnes of wheat per year from Argentina, said Ramiro Acosta, the exchange's chief economist.

Neighbouring Paraguay and Uruguay may fill the one million tonnes gap caused by the drop in Argentine production, said Pih.

The drought, which is said to be Argentina's worst in 70 years, is not expected to go away until September, the beginning of spring in the southern Hemisphere.

But even if rains come earlier, production is unlikely to exceed eight million tonnes, said the exchange's analyst.

Argentina's government would most likely build stockpiles of wheat rather than permit exports if the harvest exceeds six million tonnes, said Pih, adding that importing wheat would be politically disastrous.