The world wants more wheat, but parched soils and anger over government intervention in the market could lead Argentine farmers to sow one of their smallest crops in 15 years.
Argentina was the world's No. 4 wheat exporter in 2007. But forecasts show farmers dedicating at least 10 percent less land to the grain this season following two years of government anti-inflation policies such as export curbs and price caps. Despite the allure of high international prices, farmers say uncertainty over whether they will recoup their investment at harvest time means some are turning to alternative winter crops such as barley and rapeseed. "I've reduced my wheat area and it's not for climatic reasons, it's for political reasons," said Sean Cameron, farmer and president of the wheat growers' association AAPROTRIGO. "For more than two years we haven't received fair value for our crops. Some of us have become frustrated." The country's centre-left government has repeatedly halted wheat exports over the last two years as a way to keep a lid on the prices of everyday staples such as bread and pasta in a nation where nearly one in four people is poor. As well as freezing exports for months at a time, which depressed local prices, officials irked farmers by setting maximum prices in the local market. A three-fold increase in fertilizer costs this year is aggravating farmers' uncertainty over what price they will get, Cameron said. Argentina produced 15.3 million tons of 2007/08 wheat, according to the Buenos Aires Grains Exchange, which expects a 12.7 percent drop in the 2008/09 sowing area to 4.8 million hectares (11.8 million acres). That would be the smallest area since 1992/93. The opposite scenario is playing out in fellow southern hemisphere wheat exporter Australia, where farmers are racing to plant a bumper crop to cash in on high global prices and take advantage of damper weather after last year's drought. Dry weather is deepening the gloom at the start of the wheat campaign, preventing seeding in some northern parts of Argentina's wheat belt, mainly in Santa Fe and Córdoba, the second- and third-biggest wheat provinces, respectively. "It's almost too late for those areas, it would take a miracle now," said Eduardo Anchubidart, an analyst at the grains exchange. Some farmers have already abandoned their wheat sowing plans, partly due to the drought but also because they are hoping for a resolution to a three-month conflict with the government over export taxes on the country's top crop â€" soy. "On top of the lack of soil moisture, this political situation doesn't help at all," said agricultural weather specialist Germán Heinzenknecht of the Applied Climatology Centre, based in southern Buenos Aires province. "Some farmers will decide to wait and sow corn or soy instead." Corn-planting starts in August in Argentina, by which time some industry analysts say the government may have been forced to modify a controversial new system of export duties that links levies to international prices. The tax on wheat shipments has stayed broadly flat since the variable-rate regime was introduced in March, but farmers say repeated meddling in wheat markets since 2006 has ended up benefiting exporters and millers at their expense. Most farmers say any improvement in relations with the government would come too late for 2008/09 wheat. "If you want to increase the wheat area, you have to give clear signals and because we haven't had clear signals for two years, it's difficult to restore trust in a week or 10 days," said David Hughes, president of industry-backed group Argentrigo. "You never lose your hope, but I think it's too late." The wheat farmer Cameron said the government's move to reduce the appeal of soybeans by raising export duties on the oilseed, could end up backfiring at the expense of crops that weigh heavily on local food prices, such as wheat. "Because it's the cheapest crop to produce and the last to be planted â€" despite everything that's theoretically being done to avoid it â€" there's going to be more soy," he said. Reuters