November 5, 2007

 

Argentine wheat exporters warn of default due to government block

 

 

Argentine farm groups are warning of an inevitable default in wheat export commitments in a few days if the government doesn't open the export registry for wheat, the groups said in a joint communiqu¨¦ Friday (November 2).

 

Brazil, the primary market for Argentine wheat shipments, will be especially affected, said the release signed by the leading grain exchanges, export groups, farm groups and millers.

 

However, defaults "are probably not going to happen," and the problem should be resolved through negotiations before that point, a representative of one of the groups signing the letter said on condition of anonymity.

 

In March, the government closed the registry for new wheat exports in the face of soaring export declarations. Companies had declared 8.8 million tonnes of 2006/07 wheat export commitments.

 

With the 2007/08 wheat harvest beginning, the government is expected to reopen the export registry soon, but an increase in the export tax is expected to be implemented first, according to local press reports.

 

The government is studying increasing the export tax on grains, an Economy Ministry source confirmed Tuesday.

 

The government will call a meeting of major players in the wheat sector to discuss and debate a reopening before making any moves, a spokesman from the Agriculture Secretariat said Thursday.

 

Despite blocked exports, grain exporters have already bought up almost half of the 2007/08 wheat crop expected to be available for export, according to the Agriculture Secretariat.

 

The US Department of Agriculture sees Argentina exporting 10 million tonnes of wheat from this season's crop. The Agriculture Secretariat forecasts 2007/08 wheat production of 14.5 million to 15.3 million tonnes.

 

Faced with soaring international grain prices, the government has been struggling this year to rein in sharp inflation in basic foods. The government has imposed export limits and bans, reached informal price agreements with supermarkets and began paying broad subsidies to domestic grain users such as feedlots, dairies and millers.