July 6, 2012

Argentina's winter wheat planting down due to export limits

Due to government export limits that force them to sell the grain at a steep discount, Argentinean farmers continue to cut back on winter wheat planting despite excellent growing conditions.

The Buenos Aires Cereals Exchange cut its 2012-13 wheat area forecast to 3.7 million hectares (9 million acres) Thursday (July 5), down from the 3.8 million hectares estimated last week.

The lower estimate is due to less planting in fields on the northern edge of the farm belt as the planting window draws to a close, Buenos Aires Cereals Exchange crop analyst Esteban Copati said. To date, 64.3% of the wheat crop has been planted, according to the exchange.

Argentina is one of the world's top grain producers, ranking No. five in wheat exports, according to the USDA. The majority of the wheat it exports goes to neighbouring Brazil.

Despite the great conditions after steady showers recently, Argentina's wheat area is seen dropping sharply this season as farmers turn their nose up to the crop because of depressed local prices due to export controls on the grain.

Argentina tightly regulates corn and wheat exports to keep local food prices low. The government only issues export permits when it decides that enough grain has been set aside to meet domestic demand.

Those export limits drive down local prices, forcing farmers to sell their grain at a steep discount relative to global values. That has fuelled a big shift away from wheat in recent years. Farmers planted 4.6 million hectares of wheat during the 2011-12 season, down from 5.9 million hectares during the 2007-08 season, before the government started enforcing tight limits on exports. In the 2001-02 season, 7.1 million hectares were sown with wheat, according to the ministry.

Last month the government said it plans to allow six million tonnes of wheat exports from the 2012-13 crop being planted. Domestic wheat demand for 2013 is estimated at 6.5 million tonnes, according to the Agriculture Ministry. That implies total 2012-13 wheat production will reach about 12.5 million tonnes.

The USDA has forecast Argentina's 2012-13 wheat crop at 12 million tonnes. The exchange has yet to forecast production.