August 8, 2008
The crop is more than 98 percent harvested with only a few lots remaining in the northwestern provinces of Salta and Tucuman to be collected.
On July 18, President Cristina Kirchner signed Decree 1176, which returned export taxes for corn, wheat, soy, and sunflowers to their fixed levels prior to the March 11 implementation of variable export taxes. Currently the export tax on corn is 25 percent. For the 2008/09 crop, Post forecasts a drop in harvested area by 5 percent from the previous year -- leading to an expected area harvested of 2.95 million hectares. This drop in area is mainly due to external factors which have created uncertainty about future corn prices.
USDA forecasts the 2008/09 wheat harvested area to fall by 12 percent from the previous year, totalling 4.9 million hectares. Production is forecast to reach 14 million tonnes, a decrease of 2 million tonnes from the previous year, due to the drop in area. Wheat exports for 2008/09 are expected to fall to 9.1 million tonnes due to lower production and stable domestic consumption. The Government of Argentina (GOA) announced authorization of an additional 902,608 tonnes of wheat for export. The GOA increased export taxes on wheat flour to 18 percent.
Particularly, unresolved concerns over the export registration process, which has a significant impact on producer prices, will likely affect planting intentions. Although export registrations are open for corn, Argentina's Oficina Nacional de Control Comercial Agropecuario (ONCCA), has broad authority to stop future commodity exports to control domestic supplies - a situation that leaves many producers concerned that future restrictions on corn (as well as wheat) exports could occur.
New prerequisites/requirements placed on exporters have also added complications to the export registration application and approval process. In addition, the high costs associated with corn production (as well as its greater yield risk due to inclement weather compared to other crop options) will entice farmers to choose cheaper, less risky crops - particularly soy.
USDA expects overall production to remain unchanged from last year's level due to lower harvested area and lower than initially expected yields. Yields are forecast to be slightly lower than initially believed due to expected decreases in fertilizer use (particularly urea) and a lack of high yielding hybrid seeds. Increased fertilizer costs will likely lead many farmers to use less of those inputs. Planting seeds of good quality are somewhat scarce due to lower yields in the 2007/2008 crop due to unfavourable weather.
Likewise, it is also lowering the 2008/09 export forecast to 15 million tonnes due to lower expected production, as well as previously mentioned complications with the export registration process. Domestic feed consumption is also seen to fall to 4.6 million tonnes due to a tighter corn supply and increased supplies of substitute feeds like sorghum and barley.
The USDA forecasts a lower by 12 percent 2008/09 wheat area harvested, totalling 4.9 million hectares. Dry conditions earlier in the planting season forced many farmers to delay seeding, which has now reached around 80 percent of the total projected area. The lack of moisture, particularly in the central northern wheat regions and southeastern Buenos Aires province, has delayed planting coverage by around 6 percent from this time last year. In the northern provinces of Santa Fe, Cordoba, and Entre Rios, as well as La Pampa, about 80 percent of the projected area for wheat was planted.
Although some farmers may plant in those areas, southern Buenos Aires is the only remaining area where a viable planting window is still open (until late August). It is unlikely that the government's repeal of the variable export taxes will have a significant favourable impact on planting intentions in southern Buenos Aires due to unresolved complications with the export registration process.
Production is forecast to reach 14 million tonnes, a decrease of 2 million tonnes from the previous year, due to the drop in area mentioned above. In addition, lower than average yields are expected in 2008/09 due to higher prices for urea (nitrogen) and more spring wheat planted in northern Buenos Aires due to the drought in the fall (which prevented planting winter wheat, which would have given higher yield).
Exports for 2008/09 are expected to fall to 9.1 million tonnes due to lower production and stable domestic consumption. In addition, Brazil (the largest buyer of Argentine wheat) has eliminated its external Mercosur import tariff for wheat, which means that Argentine wheat will have stronger competition for the Brazilian market from other world suppliers in a global situation that will likely see increased production in (and exports from) competitor countries. Ending stocks are expected to drop by 100,000 tonnes due to the tighter supply.
Currently, export registrations are open for 2007/08 crop wheat. The GOA previously announced export registration openings for 100,000 tonnes in April (destination Brazil) and 1 million tonnes in June (500,000 tonnes destination Brazil). On July 31, ONCCA published Resolution 2404/2008, which opens an additional 902,608 tonnes of wheat for export.
A portion of that wheat (340 thousand tonnes), however, corresponds to the unexported portion of the 1 million tonnes announced in June. On July 28, the GOA published Resolution 189/2008, which increased the export tax for wheat flour (HS 1101.00.10) to 18 percent -- from 10 percent previously. As established in Decree 1176, the export tax on wheat is currently 28 percent.