June 21, 2012

Argentina to boost wheat export

In a joint conference in Buenos Aires, Vice-president Amado Boudou, Secretary of Commerce Guillermo Moreno, and Minister of Agriculture Norberto Yahuar made the announcement that the Argentinean government will increase the quantity of wheat that it allows farmers to export, it said Tuesday (June 19).

Argentina is globally one of the largest agricultural exporters, notably of soy and wheat, and those exports have been a major driver of Argentine economic growth since 2003. However, relations between the government and the agricultural sector have historically been a key fault line in Argentine politics and economics, and in 2006 the government of former president Néstor Kirchner began to impose quotas on the percentage of the wheat harvest that could be exported. The argument for that measure was that it ensured supply to the local market and kept domestic prices at an affordable level.

The policy has been maintained by the current government of President Cristina Fernández de Kirchner and the move to expand the wheat export quota by six million tonnes is the most significant expansion since its imposition. However, representatives of the agricultural sector gave a lukewarm response, notably because it has come too late in the year to affect the quantities of wheat sown by producers.

There appear to be two main drivers behind the new government position on wheat exports. Firstly, in the context of on-going government concerns over US dollar reserves, it appears to be an attempt to generate more US dollars for the government through export taxes. Secondly, the move appears to be designed to placate potential tensions with the agricultural sector, with which the government has a very sensitive relationship. However, given the views of producers' representatives that the move comes too late to significantly boost the current wheat crop, mainly harvested in December, it may have less of an impact than the government hopes.