August 8, 2011

Argentina's wheat acreage lowers 28%

Currently, Argentina's planted area for the 2011/12 season is foreseen at 4.7 million hectares - 28% lower than the average of the past decade of 6.25 million hectares.

Argentina used to be the world's biggest wheat exporter, with a 23% share of total world production in the early 1900s. More recently, the arrival of soya, economic meltdown and farm commodity export retention taxes have dented its appeal.

There are many reasons for the decline in the wheat area. Chiefly, the government has imposed financial restrictions in the wheat export market. It has also been limiting the number of export licences to control internal crop prices. These measures have created uncertainty among growers.

The annual domestic demand of the mills for wheat is 6-6.5 million tonnes, distributed evenly at around 500,000 tonnes per month. However, the mills cannot absorb this amount and exporters cannot afford the closure of the export market.

To date, there are about four million tonnes of wheat in the hands of producers from last harvest.

Brazil is the second largest importer of wheat in the world, and its usual supplier is Argentina. In future, if we can no longer supply Brazil it will seek alternative suppliers and we could lose an export market of over 5 million tonnes a year.

So, despite the good international market demand and attractive price offered for growing wheat - US$250-$280/tonne (GBP152-GBP170) at Chicago prices - Argentine growers prefer to grow peas, barley and oilseed rape to avoid the pitfalls of wheat.