March 31, 2004

Argentina's 2003-04 Wheat Exports Up As New Markets Open

Argentina is exporting more wheat to more countries than it was a year ago at this time, recent Agriculture Secretariat data show.
 
As of Friday, Argentina had sold an estimated 4.48 million metric tons of 2003-04 wheat, or 14% more than the 3.925 million tons exported a year earlier at this time.
 
"We are selling more wheat to more countries," said Sebastian Rivera, an analyst at the Secretariat.
 
Exports are up in part because production is up.
 
Argentina produced 14.5 million tons of wheat this year, compared with just 12.3 million a year ago, according to the Secretariat.
 
But higher production alone does not explain the increased number of markets interested in Argentine wheat.
 
"Production is up much more than was originally expected, when it was thought that output might reach only 11.5 million tons," said Lorena D'Angelo of the Institute of Economic Studies at the Rosario Cereals Exchange.
 
This, combined with a carryover of 1.4 million tons of exportable wheat from the previous year, has kept prices down, making Argentine wheat more competitive abroad, according to D'Angelo.
 
Argentine wheat from northern ports sold for around $162 free on board per metric ton on Monday, compared with about $178 FOB for similar hard wheat from the U.S., D'Angelo said.
 
"Because of this competitiveness, Argentina is selling to a more diverse group of countries than it was last year, when it sold mainly to Brazil and a few other countries in the region," D'Angelo said.
 
Last week, for example, Argentina began shipping wheat to Ukraine for the first time since that nation gained independence from Soviet rule in 1991.
 
As of Friday, Ukrainian buyers had signed contracts for 150,000 tons of Argentine wheat, the Secretariat reported.
 
Ukraine, which is normally a net wheat exporter, has seen its production plunge precipitously this year, forcing it to import wheat from abroad. Some reports say Ukraine may need to import around 4 million tons this year just to satisfy domestic demand.
 
Ukrainian wheat output is expected to plummet 82.5% to only 3.6 million tons this year, compared with 20.55 million tons the previous year, according to the U.S. Department of Agriculture.
 
"With this decline in production, Ukraine needs to import wheat - but so do some of Ukraine's clients," said Rivera. "Some of them have turned to Argentina. This may help to explain why more North African countries are buying our wheat."
 
As of Friday, Algeria had bought 275,000 tons of 2003-04 Argentine wheat, according to Secretariat data. Algeria bought no Argentine wheat in 2003.
 
Moreover, in mid-April Algeria will accept bids from exporters for another 50,000 tons of wheat, according to the Rosario exchange. French exporters hope to win the bidding but they "fear strong competition from Argentina," the exchange said.
 
Other North African countries buying Argentine wheat are Lebanon and Libya, which bought 30,000 tons and 50,000 tons, respectively. Neither country bought Argentine wheat last year.
 
Meanwhile, as of Friday, Tunisia had bought 75,000 tons of local wheat, compared with none a year ago.
 
Argentina's main wheat market continues to be Brazil, which has bought 53% of local wheat exports this year.
 
But Brazil, which boasted a bigger wheat harvest this year, is buying less Argentine wheat these days.
 
As of Friday, sales to Brazil were down almost 22% from a year ago, leading some exporters to say it is imperative for Argentina to continue to diversify its clientele.
 
"The notable decline in business between (Argentina and Brazil) is not a cause for concern for traders as long as other markets exist," the Rosario Cereals Exchange said Monday in a weekly commentary. "The appearance of new buyers such as Algeria, Kenya and Morocco does a lot too compensate for the dip in exports to Brazil. It's important to note that the international market has begun to consider the competitive value of Argentine grains."
 
Argentina's exportable stock of 2003-04 wheat stands at around 9.5 million tons, according to the exchange.
 
This, along with the carryover from 2003-04, puts Argentina's exportable wheat stocks up about 40% from a year ago, the exchange said.