July 26, 2012

 

 

The "perverse effect" of Argentina's capping wheat exports policy to contain food inflation is cheapening feed for pig farmers in China as well as benefiting brewers such as Heineken, according to Bloomberg.

 

Argentine farmers will boost barley planting by 17% this year at the expense of wheat, which will shrink to the second lowest in a century, the Buenos Aires Cereals Exchange said. Barley escapes President Cristina Fernandez de Kirchner's export restrictions.

 

Breweries such as Heineken and Anheuser-Busch InBev, the maker of Budweiser, stand to gain as Argentina cheapens one of their main input costs, Raul Maestre, the treasurer of Argentina's wheat growers association told Bloomberg.

 

Growers are also attracted to barley as rising corn prices are forcing pig and chicken farmers in China to switch to barley as feed, he said.

 

"Farmers are running away from wheat because of this government intervention," Daniel Miro, president of agro- industrial consultancy Novitas SA told Bloomberg in a telephone interview. "Barley is an emerging cereal."

 

Farmers traditionally opted to grow wheat instead of barley because of its higher value in export markets, Miro said.

 

The value of domestic wheat in Argentina has slumped below US$200 a tonne, compared with US$210 a tonne for feed barley, Maestre said.

 

Wheat futures in the Chicago Mercantile Exchange have surged 49% since mid-June and reached US$9.38 a bushel (US$345 a tonne) last week, the highest for a most-active contract since August 21, 2008.

 

Barley, which doesn't trade on the CME, fetches between US$340-350 for high-quality cereal bought by brewers overseas and between US$300-320 for animal feed, Miro said. China's animal feed importers are lowering their barley quality standards to make up a global grain shortage, Miro said.

 

Saudi Arabia is the biggest importer of Argentine barley because the cereal is preferred as an animal feed to corn, according to Novitas.