June 19, 2009

Argentine corn trade stalled this week following news that exporters had reached an agreement with the government to pay more to farmers in exchange for export permits.

 

But exporters were hesitant to rush in with higher offers and sellers are waiting to see the higher prices before they bring their corn to market.

 

"Apathy reined in the market, with the wheat and corn agreement remaining simply a story in the papers, and the sensation that it's just more of the same," said Roagro analyst Jose Amuchástegui in a market note.

 

Spot corn wasn't traded Thursday but traded at ARS435 per tonne at the Rosario Grain Exchange Wednesday, compared with between ARS420 and ARS450 last Thursday.

 

Corn futures weren't traded either on Thursday.

 

Argentina's grain exporters reached a deal with the government late Tuesday to buy three million tonnes of 2009-10 corn and an additional 1 million tonnes of new crop wheat at a theoretical price set by the government. In exchange, the exporters will be ensured export permits for the surplus wheat and corn from the 2009-10 crop.

 

On Thursday, the government's theoretical price that farmers should receive for spot corn was set at ARS530.

 

The new deal is expected to boost local corn prices, which have been trading at a discount due to a risk premium because of the government's intermittent closing of exports.

 

Still, stocks of wheat and corn over domestic demand will have to be confirmed by the agricultural trade office, or ONCCA, before the exports will be approved.

 

The agreement follows a similar deal struck last month for wheat exports.

 

On May 4, President Cristina Fernandez said exporters agreed to buy 1 million tonnes of old crop wheat at full price, which is the theoretical Free-Alongside-Ship price minus the 23 percent export tax. Exporters will then have to sell that wheat back to local millers at market price. In exchange, the exporters were guaranteed authorization to ship 1 million tonnes of 2009-10 wheat.

 

The government hopes the new agreement will stimulate wheat and corn planting this season amid signs that the area planted with the crops will fall sharply as farmers continue a major shift to soy.

 

"Wheat prices are riding a tailwind as the Agriculture Secretariat keeps raising the official reference price," the Rosario Exchange said.

 

Spot wheat traded at ARS654 per tonne Thursday, up from ARS611 a week ago.

 

Wheat futures weren't traded Thursday.

 

Spot soy were traded at between ARS1,025 and ARS1,050 per tonne at the Rosario Grain Exchange Thursday, down from between ARS1,055 and ARS1,080 a week ago.

 

May 2010 soy futures traded at US$232 a tonne in Rosario Thursday, down from US$240 from a week ago.