March 7, 2022

 

Argentina to control domestic wheat prices

 

 

Argentina said it will control domestic wheat prices and mitigate food inflation as global prices soar to 14 year highs due to Russia's invasion of Ukraine, Reuters reported.

 

The Argentinian government has agreed with flour mills and exporters to establish a "trust" that will maintain low domestic prices. The government is already restricting exports to contain food prices.

 

Argentina is a key wheat exporter, the biggest worldwide exporter of processed soy, and the second biggest corn exporter. The country's projected wheat harvest for the 2021/22 season is 22.1 million tonnes, a new record.

 

Russia's invasion of Ukraine has pushed wheat prices to historic levels, especially as both countries account for about 29% of global exports.

 

Argentinian grain prices closed last week at an average of ARS 32,103 (~US$298; ARS 100 = US$0.91) per tonne, 19% up compared to the week prior.

 

Argentina's price mechanism will remain until January 2024 and will focus on prices of local sales of wheat flour and dry pasta.

 

The government said the policy proposes transferring 800,000 tonnes of wheat to the local market to safeguard supply and reach price stabilisation of these key products.

 

Gustavo Idigoras, head of the CIARA chamber of grain processors, said agro-exporters need to pay a certain percentage (capped at 1%) into a trust for each tonne of wheat declared for export.

 

Idigoras said the trust will be channelled towards subsidising the sector that produces food for the domestic market, which would disrupt production decisions ahead of the 2022/23 wheat cycle.

 

Argentina had restricted wheat exports from the 2021/22 harvest to 14.5 million tonnes. Official data showed exporters have already declared foreign sales of 13.6 million tonnes.

 

Nicolás Pino, head of the major Argentine Rural Society, said the trust proposal goes against the government's objective to export more, two months following a new campaign of wheat. The trust was agreed with mills and exporters, but was not discussed with Argentina's farmers.

 

-      Reuters