July 28, 2014
Gov’t approves 500,000t of wheat exports
Number could increase to 1.5 million tons, half of what was allowed in 2013
The government yesterday authorized 500,000 tons of wheat exports with the potential to increase the limit up to 1.5 million — half of what was allowed in 2013.
The precautionary measure — with the amount allowed set for monthly review — comes after a negative experience last year, when a poor harvest affected domestic supply, leading bread prices to soar.
While they remain projections that may be adjusted, wheat export levels have not been this low since 1978, when 1.44 million tons of the crop were loaded onto ships heading abroad.
Economy Minister Axel Kicillof, his Agriculture counterpart, Carlos Casamiquela and Trade Secretary Costa confirmed the official forecast of a 9.2-million-ton total harvest, and slammed the Grains Stock Exchange for having overshot its estimate last year.
Fifty thousand tons of flour exports were also approved, while the officials emphasized a general intention to export everything hauled in above the 6.5 million tons of domestic demand.
Casamiquela did not refer to his assurance to La Nación last month that firms would be granted the opportunity to export the approved 1.5 million tons of wheat the government halted when prices soared last year.
“What matters to us is that people have bread supplies at reasonable prices,” Kicillof emphasized, reiterating traditional Kirchnerite criticism of the “the neoliberal policies that led to 14 million hectares being foreclosed in 1999, with prices between US$1,000 and US$2,000, and today we see those values oscillating between US$6,000 and US$10,000.”
The farming sector largely criticized the announcement, reiterating complaints that heavy regulation of the wheat and corn markets under the claim of shielding citizens from high international prices merely pushes producers away from sowing the crops and toward the always-profitable soybean.
After mulling over the import of tomatoes last week, Kicillof opened the door to importing wheat if necessary.
“We are willing to debate and seriously discuss things. We defend Argentines’ bread baskets, we are working on boosting trust, and we have signed agreements to allow for wheat imports should there be shortages,” the minister said.
The bread price affair
“It was a serious incident for private organizations to report a superior harvest to what was then available to export,” Kicillof bemoaned yesterday.
He insisted that “all surplus is exported, and the government has absolutely nothing more to do, but when the Exchange misinforms society and we facilitate or free up exports over a surplus that does not exist, problems such as last year’s, when there was a shortage of wheat and flour, come up.”
Last year, the Grains Stock Exchange had initially forecast a harvest of 12.5 million, which eventually fell short by more than four million tons, with the final harvest weighing in at 8.2 million.
AGRIPAC consultant Pablo Andreani told the Herald it was the government made the mistake last year by authorizing exports ahead of time, uncertain of whether they were realistic, leading to yesterday’s more conservative figure of 1.5 million tons.
In more general terms, Andreani considered the announcement “one for the papers,” which “will have no effect on the market,” considering the absence of news promised on the sale of wheat left over from last year.
Developments on the matter were expected yesterday, while Casamiquela is also said to be working on speeding up the bureaucracy behind the authorization of exports.
How much, in context
The Herald asked a grains broker, who preferred not to be named, to gauge the amount authorized: “It’s very little. Domestic consumption is at 6.5 million tons, as the minister said, but the gap with the forecast harvest depresses prices.”
“This is the tenth campaign in which these types of interventions have been implemented, and bread prices are 10 times higher, so the interests of consumers have not been defended,” the broker continued, specifying that before the current exports authorization (ROEs), six million hectares were sown, and now levels are at 3.1-3.4.”
“What you end up doing is having farmers sow less, and keeping surplus in the country, making producers sit on their wheat and pushing supply to excessive levels,” he concluded.
Such declarations generate a certain conflict with Casamiquela’s remarks yesterday calling for “caution regarding models of production, as rotation is necessary. This is why increasing the amount of land sown with wheat should be increased.”
Liaison Board reacts
The government’s longstanding enemy, the Liaison Board, charged against the announcement in a release, describing it as “a clearly false declaration.”
“Neither the Board nor Argentines have a reasonable price for bread that matches their income level, nor do farmers have prices according to their effort and the cost of materials and inflation, which pound away incessantly,” the farming sector grouping said, adding: “Never will we be satisfied with the drastic reduction of the sown area of wheat or the lack of a transparent market that impedes fulfillment of commitments taken on by farmers.”
Confederaciones Ruráles Argentinas head Rubén Ferrero claimed “we have the potential to produce 18 or 19 million tons,” which would allow for “some US$3 billion” in revenue.