November 27, 2006

 

Speculations rife over Argentina's corn export ban
 

 

Argentina, which recently suspended corn export permits, has been considering further steps aimed at shielding local buyers from high global prices, government and industry sources said.

 

The Argentine government earlier suspended new corn export orders beginning Nov 20 indefinitely because of concern about a surge in requests for corn amid dwindling supplies.

 

Argentina is the second-largest corn exporter after the United States. The country normally exports about 60 percent of its corn production.

 

An Argentine government source was quoted as saying that what was being sought was a measure that doesn't put the interest of any one link of the production chain above those of another, be they buyers, producers, exporters or processors.

 

Officials were considering an option similar to that planned for the wheat sector, where a new resolution would oblige exporters to provide local millers with cut-price wheat.

 

The step could see local buyers pay between 270 and 280 pesos (US$87-91) per tonne for the grain, compared with the 395 pesos (US$128) paid earlier.

 

The only solution would be to let the market operate freely, noted an analyst, adding that if the government wants to keep the corn price relatively low for domestic consumption, they can do it. They have the resources via export-tax revenue, he said.

 

Meanwhile, the country's farmers have been planting 2006/07 corn and the USDA forecasts a harvest of 17.5 million tonnes, with exports of 11.5 million tonnes. Even as the government closed the corn export registry, exporters had already listed more than 10 million tonnes.

 

What remains to be seen is with what model the export registry reopens, said Juan Gear, president of the corn association, MAIZAR, referring to speculation the government might reduce the notice period for export permits from one year to six or three months.

 

The government's initiative was based on the fact that the halt would allow them to audit existing orders and ensure enough corn to meet domestic demand. Corn prices rose to a 10-year high of US$3.8175 a bushel on Nov 8, partly as hot, dry weather in July reduced US production.

 

Soybean and wheat also rose. Palm oil for February delivery jumped as much as 5.7 percent to RM 1,864 (US$511) a tonne, the highest since May 2004.

 

Incidentally, Argentine President Nestor Kirchner has also sought to slow inflation this year by limiting or banning exports of wheat and beef.

 

Competing demand from the food and ethanol industries might cause China to cut back on exports and rely more on corn imports in the future. A USDA report noted that a quadrupling of ethanol production in China to 4 million tonnes by 2010 and a 15% target of renewable fuel for all transportation energy needs by 2020 would eat into corn supply worldwide.

 

Though India has not issued a ban on corn exports, there are fears that demand may exceed supply in the domestic market, reported the CBOT. Corn production in India this season could be near 12.75 million tonnes, with demand near 14 million tonnes, the board noted.

 

Among leading corn consumers in Argentina are beef farmers who use feedlots to fatten their animals.

 

The cost of corn was still less worrisome than the meat price since the government was setting a beef price far lower than it should be, pointed out Rodrigo Troncoso, head of a feedlot industry group.