July 11, 2012

 

Argentina's wheat prices up on government's huge export approval

 

 

Following the government's approval of large 2012-13 export volumes last month, Argentina's wheat prices have risen, a move welcomed by growers even though it may have come too late to bolster this year's plantings.

 

Argentina is the world's sixth-biggest wheat exporter and the key supplier to neighbouring Brazil. The price rose to US$195 per tonne from about US$160 before the announcement - comes as global grains markets are being pumped by bad US crop weather.

 

Argentine growers say profits are hurt by export curbs imposed on wheat and corn as part of the state's push to ensure domestic food supplies. The government responded to these complaints by announcing the full season's export quota at once.

 

It previously unveiled export licenses gradually throughout the year, a system that reduced competition among buyers. On June 19, the government said six million tonnes of 2012-13 wheat would be freed for export.

 

"Wheat prices started to rise when the amount to be exported was announced," said Guillermo Moulia, a trader with the Guardatti Torti grains brokerage in Argentina's main port city of Rosario.

 

Wheat closed at US$195 per tonne on Friday (July 6), the most recent day of trading since Monday (July 9) was a local holiday. The 2012-13 harvest will take place in December and January.

 

Growers have sown 57% of the 3.8 million hectares planned for wheat this year. The total expected area is down from the 4.6 million hectares seeded in the 2011-12 season, official data shows. Government officials expect a 2012-13 wheat harvest of 12.5 million tonnes versus 13.2 million in 2011-12.

 

Barley, which is not subject to export curbs, is displacing wheat in Argentina's Pampas grains belt, said Santiago Cameron, head of local wheat chamber Argentrigo. The government's announcement marks an improvement over the previous, gradual export permissions, he said.

 

"But if the announcement would have been made earlier, it may have convinced more farmers to plant wheat," Cameron said.

 

"By the time the government freed the season's exports, I had already planted area that I could have used for wheat with something else," he added. "Barley is rapidly displacing wheat in southern Buenos Aires province."

 

Buenos Aires, where Cameron's 6,000-hectare farm is located, is Argentina's main grains producing region.

 

US grain futures soared on Monday (July 9) as continuing dryness in the US Midwest looked likely to ravage crops, and floods in Russia's southern wheat region caused havoc. Wheat crops in Western Europe meanwhile urgently need sunshine to push them towards ripeness and high quality after a wet and cloudy start to the summer.

 

Argentina's 2012-13 wheat plantings are set to fall 20% this season to 3.7 million hectares, less than previously forecast, despite favourable crop weather in the South American country, the Buenos Aires Grains Exchange said last week. But the government is determined to induce more wheat farming, a priority illustrated by the new export policy, according to Agriculture Ministry Deputy Secretary Oscar Solis.

 

"This is aimed at improving the business climate, above all for small and medium sized producers ... so prices allow them to plant more wheat," he said.