January 7, 2010

Argentine wheat farmers fear regulations may eliminate buyers

Wheat growers in Argentina's main production area, responsible for about half of the South American country's output, are concerned they won't find buyers due to government regulations.

"Exporters have withdrawn from the market because government export quotas have been met for the season," said Alejandro Conti, president of the wheat growers association Aaprotrigo.

The Argentine government set a 6.5 million-tonne annual quota for domestic consumption on September 30, when it ended a ban on exports. Surpluses can be exported if authorised by the agricultural exports agency, known as Oncca. The government said quotas are necessary to ensure domestic supplies.

Harvesting in southern Buenos Aires province, where Tandil is located, is expected to end about January 10. About 3.5 million tonnes to 4 million tonnes are planted in the region, out of Argentina's overall 7.5 million tonnes for the current season.

"Under normal market conditions, there would be competition between millers and exporters to offer better prices for wheat, but now they are both tied by government regulations," Conti said.

Wheat for March delivery added 0.1% to US$5.5375 a Bushel on the Chicago Board of Trade. The most-active contract dropped 14% last year. Milling wheat for March delivery traded on Liffe in Paris slipped 0.6% to EUR133.50 (US$191.81) per tonne.

Argentine farmers this year sowed 2.8 million hectares (6.9 million acres), the smallest crop on record, after the outlook for drought and government export curbs discouraged planting.

Weather forecasts before the season began in February called for the worst drought in a century to continue. Farmers had reduced planting plans based on expected conditions before rains unexpectedly occurred mid-year.