In an effort to ensure domestic supply and contain inflation Argentina announced Thursday the temporarily suspension of wheat and flour exports.
This is not the first time the administration of President Nestor Kirchner applies such measures to avoid international demand from distorting domestic prices. But since Argentina is one of the world's five main wheat exporters the decision will have an impact in world markets and in neighboring Chile that purchases a significant percentage of its flour needs from Argentina; 558.000 tons last year only. "So as not to affect domestic supply, exporters are informed that as of March 8, 2007 the Registry for exports of wheat produce and wheat flour will remain temporarily closed", said the Agriculture Secretary in its official internet site. "We don't for see any immediate supply problems since there are alternative sources such as United States and Canada, which in 2006 represented 30 and 10%& of Chilean imports, but it will have an impact on prices because without Argentina, Chile will have one market less as reference", said Nestor Ossa one of Chile's main wheat and flour brokers. According to Argentina's Agriculture Department the 2006/07 wheat crop will reach 14 million tons. However the US Department of Agriculture estimate is 14.2 million tons. In Argentina farm analysts said the decision sent a "distortion signal because farmers are going to think twice before planting crops linked to the domestic market. I see more land going to soybeans". The USDA estimates that Argentine 2006/07 wheat exports could reach 9.5 million tons. This week wheat export licenses totaled 8.7 million tons. Last year the Kirchner administration obsession with inflation temporarily banned beef and corn exports and forced agreements with manufacturers to freeze prices. A third of the Argentine population lives under the poverty line and government authorities are most sensitive about food prices, besides the fact next October Argentina will be holding presidential elections. The Consumer prices index in Argentina reached 9.6% last year pushed mainly by food prices.