Argentina: Government halts wheat exports to fight rising flour, bread prices

Argentina's government has halted wheat exports as it grapples with rising prices for flour and bread, a staple of the Argentine diet, the Wall Street Journal reported on June, 26.

The government has informed exporters that it won't authorize further shipments from the 2012-13 crop, said a person from the grain export sector, who spoke on condition of anonymity.

The government also ordered grain exporters to sell about 370,000 metric tons of wheat to local millers that was about to be shipped abroad, he said.

Local media reported on June, 26 that Domestic Commerce Secretary Guillermo Moreno met with grain exporters earlier this week to inform them of the restrictions on wheat and flour exports. Spokespersons for Mr. Moreno and the Agriculture Ministry declined to comment.

The measures will likely force Brazil - the top buyer of Argentine wheat - to turn to other markets such as the U.S. or Canada to meet its demand for the grain. Argentina was the world's seventh-largest wheat exporter during the 2012-13 crop year, according to the USDA.

Argentina heavily regulates wheat exports to keep food prices low. Those controls have angered farmers, who for years complained their crop fetched far less at home than on international markets.

Wheat currently fetches $480 a metric ton on the spot market of the Buenos Aires Cereals Exchange, roughly double the price of wheat in the U.S. But with January 2014 wheat futures trading at $195 a ton, it remains to be seen if today's high prices tempt farmers to sow more of the grain.

Frustration with government policies and an uncertain outlook for the economy might lead some farmers to plant less wheat this season, especially in the wheat belt of southern Buenos Aires Province, wheat farmer David Hughes said.

"The government doesn't authorizes exports and doesn't give you any explanation," Mr. Hughes said.

Argentina grew one of its smallest wheat crops in a century last season as dry weather and low prices led farmers to plant other crops like barley. Just 9 million tons of wheat were grown during the 2012-13 season, down from 14.5 million tons a year earlier, according to the Agriculture Ministry. Of that crop, government figures show that 6.2 million metric tons were earmarked for domestic use and just 3.5 million tons set aside for export.

As of June 12, wheat exports this year totaled just under 3 million tons, down from 7.1 million tons a year earlier, according to the ministry. Wheat flour exports reached 465,700 tons, compared to 720,800 a year ago.

Government intervention in the wheat market has led farmers to sow just 3 million to 4 million hectares a year, compared to 6.5 million hectares in the past, said Santiago Labourt, president of wheat industry trade group ArgenTrigo.

"There was very little wheat [from the last crop], while consumption stayed high," Mr. Labourt said in reference to today's high spot prices.

Wheat production is expected to rise during the current season thanks to good weather and higher prices. Farmers will produce about 16 million metric tons during the 2013-14 season, according to government forecasts.

The move to temporarily close wheat exports to cool flour and bread prices comes amid a backdrop of double-digit inflation that is pushing up wages and the prices for most goods and services.

Bakeries in Buenos Aires Province recently agreed to a 28% increase in wages and bonuses for their unionized workforce.

While the government says its consumer price index rose 10.3% on the year at the end of May, most private sector estimates put annual inflation north of 20%. Many economists say inflation is a result of the central bank directly financing the federal government.

With mid-term congressional elections looming in October, President Cristina Kirchner has made containing inflation a priority, especially in the key electoral battle grounds like Buenos Aires Province and the federal capital.

Millers and bakeries in Buenos Aires City have agreed to make small amounts of basic bread available for just 10 pesos ($1.87) a kilo, state news agency Telam reported this week.

Last month, the government also cut a deal with supermarket chains to hold prices steady on 500 basic goods. The agreement includes 1,000 stores across the country and replaced a blanket price freeze on just about all supermarket items that had been in place since early February.

The administration of President Cristina Kirchner has also launched a government-sponsored campaign to train thousands of people belonging to unions, activist groups and churches to police store prices.

28 June, 2013