Friday, April 11, 2014

Argentine wheat exports to double as sowings rise


Argentina's wheat exports will double next season, as elevated prices encourage farmers to return to the grain, but volumes will remain low by historical levels, muting the country's return as world shipper.

Argentina will export 6.0m tonnes of wheat in 2014-15, starting in December - well above the 39-year low of 3.0m tonnes expected for this season, the US Department of Agriculture's Buenos Aires bureau said.

"Some doubt" that even that even 3.0m tonnes will be reached this season, the bureau said.

However, even 6.0m tonnes represents a relatively small volume compared with those that Argentina has historically shipped, to earn itself a seat on the top table of world wheat exporters.

Shipments approached 13m tonnes in 2011-12, and averaged 9.4m tonnes of the decade to that season, before farmers cut sharply their wheat plantings, blaming government export curbs.

Argentina has been a particularly important origin of wheat export supplies for neighbouring Brazil - a structural importer, which has turned increasingly to the US to fill its needs – but has also offered supplies competitive enough to trade into African destinations, such as Egypt.

'Extremely high prices'

The revival in the popularity of wheat reflects the "extremely high prices" seen in Argentina after farmers last season cut sowings drastically, saying that export restrictions, aimed at ensuring adequate domestic supplies, were denying them the chance to benefit from higher global values.

The price rises proved particularly acute after the government in 2012-13 overestimated the size of the domestic wheat crop, permitting extra exports, and meaning that domestic mills had to pay up for supplies in a rally which peaked late last year.

The United Nations Food and Agriculture Organization, estimating Buenos Aires wholesale flour prices at $570 a tonne, said that while values "continue to decline from their record highs of late 2013", they are still "almost 70% higher than a year earlier, underpinned by the limited recovery of the 2013 wheat production and low levels of stocks".

Political concessions?

There is talk that the government is, ironically, attempting to encourage wheat sowing in part by easing up on export curbs.

The bureau said that "contacts thing that export taxes, currently at 23%, could be waived" to promote wheat sowing, with farmers offered inexpensive credit too, although growers remain sceptical.

"If some of these measures are announced, planted area could increase even further, but not significantly as most producers would prefer to wait and see after many years of disbelief and uncertainty," the bureau said in a report.

Farmers have long had a difficult relationship with the government, for which Argentina's hefty crop exports represent an invaluable source of foreign currency for the cash-strapped country.

Wheat vs barley

A big incentive to plant wheat is the disappointing results for many farmers of growing barley instead.

"Barley area grew significantly in the past few seasons primarily as an alternative for farmers to run away from planting wheat which was and continues to be closely controlled by the government, making the price for the farmer lower than it should be," the bureau said.

However, "in the past two crop seasons many barley producers were disappointed with the quality and yields obtained", with the price also declining, opening up a discount of $25-35 a tonne to wheat, compared with historic parity.

The bureau forecast Argentina's barley area falling 24% to 950,000 hectares, on a harvested basis, dragging production down one-third to 3.3m tonnes, the lowest in four years.

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