Wheat growing economics do not stack up in Argentina, says Federico Rolle
Argentina used to be the world’s biggest wheat exporter, with a 23% share of total world production in the early 1900s. More recently, the arrival of soya, economic meltdown and farm commodity export retention taxes have dented its appeal.
Currently, the planted area for the 2011/12 season will be 4.7m hectares – 28% lower than the average of the last decade of 6.25m hectares. Personally, I drilled 500ha of wheat last year, but this year I will not be planting any.
There are many reasons for the decline in the wheat area. Chiefly, the government has imposed financial restrictions in the wheat export market. It has also been limiting the number of export licences to control internal crop prices. These measures have created uncertainty among growers.
The annual domestic demand of the mills for wheat is 6 to 6.5 millions tonnes, distributed evenly at around 500,000t per month. However, the mills cannot absorb this amount and the exporters cannot afford the closure of the export market.
To date, there are about 4m metric tonnes of wheat in the hands of producers from last harvest. I still have 150 tonnes of wheat stored from last harvest, for which I have found no buyers. Poor market interest leaves growers reluctant to plant wheat again. This has a negative impact on companies that supply inputs, including seeds, pesticides and fertilisers, the retail chain and industry exports.
Brazil is the second largest importer of wheat in the world, and its usual supplier is Argentina. In future, if we can no longer supply Brazil it will seek alternative suppliers and we could lose an export market of over 5m tonnes a year.
So, despite the good international market demand and attractive price offered for growing wheat – US$250-280/t (£152-£170) at Chicago prices – Argentine growers prefer to grow peas, barley and oilseed rape to avoid the pitfalls of wheat.
