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Wheat: Argentina’s Got Plenty But Won’t Let Much Go

Owen Taylor
By Alastair Stewart, DTN South America Correspondent February 10, 2015

A jump of around 20% in planted area led to a substantial increase in Argentina wheat production in 2014-15.

But government conservatism in offering export licenses means little is available for shipment.

“Wary after problems in the past, the government is being very tight with export licenses,” said Sebastien Villena, representative of the CREA farm group in Pergamino, Buenos Aires province.

Argentina planted approximately 11 million acres of wheat in 2014-15, bucking the trend for declining area over the last decade.

Generally good crop development during the second half of last year prompted the Agriculture Ministry to peg production at 13.2 million metric tons and the Rosario Cereals Exchange to put output at a more conservative 12.1 mmt, up from 9.5 mmt the year before.

But not all agreed things ran so smoothly. The Buenos Aires Cereals Exchange analysts point to elevated winter temperatures that delayed the reproductive stages in the center and south of the wheat belt, which accounts for 90% of planted area. As a result, they say the harvest, which ended in early January, only totaled 11.2 mmt.

EXPORT QUOTAS

Whatever number you use, Argentina still has substantial exportable tonnage this year.

Domestic wheat consumption totals 6 mmt, while carryover stocks stand at around 2 mmt.

That leaves Argentina with 7 to 9 mmt of exportable wheat, although shipments more likely will come in at around 4 to 5 mmt.

However, the government is taking a cautious approach, only offering 2.2 mmt in export licenses so far for 2015.

More licenses will probably be forthcoming, but the government is being careful not to repeat the farcical situation of 2012 when it allowed too many shipments early in the year, forcing millers to import later in the year to meet demand.

The problem for farmers is that nobody knows when the new quotas will be announced, and for what quantities. Until that information is available, markets will remain depressed with discounts of $50 per ton currently common.

“It is precisely this type of uncertainty that has caused so many to simply give up planting wheat,” said Jorge Bianciotto, who manages over 10,000 acres around Pergamino, Buenos Aires province.

Before export quotas were introduced in 2006, Argentina used to plant and export larger volumes. Peak acreage was 18.5 million acres, while peak production was 16 mmt.

However, successive years of low output for Argentina means Brazil — its main buyer of wheat — now regularly imports large volumes from North America.

DOMESTIC MARKET SLOW

With international prices low and export potential unknown, farmers appear to have stopped selling after a brief post-harvest burst in January.

According to Agriculture Ministry figures, farmers had sold 6 mmt of wheat up until Jan. 22, double the 3 mmt sold last year from a much smaller crop.

Local millers have stocks of around 1.5 mmt, or approximately three months’ production, and so are in no rush to secure new consignments at present.

Alastair Stewart can be reached atAlastair.stewart@dtn.com

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Owen Taylor
By Alastair Stewart, DTN South America Correspondent February 10, 2015