Argentina Seen Planting More Wheat, But Many Doubts Remain

Argentine wheat-planting prospects remain uncertain due to government policy and the weather, but most expect production to rise significantly from the amount grown from 2009-10's drought-stricken crop.

Argentina's wheat exports have dropped off sharply over the last two years as dry weather caused output to fall and the government sharply curtailed shipments to ensure domestic supply. The country, set to kick off wheat planting next month, is expected to rank eighth in world wheat exports this year with 4.5 million metric tons, down from third place in 2006-07 when 12.2 million tons were shipped, according to the U.S. Department of Agriculture.

Agritrend analysts Gustavo Lopez forecasts 2010-11 planting up almost 25% at 3.4 million hectares, with production of 9.4 million tons. The 2009-10 crop totaled 7.5 million tons, according to the Agriculture Ministry.

AgriPac Consultores analyst Pablo Adreani is more optimistic, predicting production of between 14.8 million and 17.7 million tons due to the sharp increase in planted area.

However, for production to reach the higher end of that range, there will need to be enough rainfall at planting time, and the government has to announce some sort of stimulus measure such as lower export taxes or an opening of exports for next year, Adreani said.

The government tightly regulates shipments, only allowing exports once enough wheat for domestic supply is confirmed and set aside. Domestic demand last year was pegged by the government at 6.5 million tons.

Despite depressed prices due to the export limits, planted area is still likely to rise as farmers need to rotate crops, said Ricardo Baccarin, vice president of local commodities trading house Panagricola.

In addition, good soil-moisture levels after steady autumn showers, the lack of alternative crops in the southern areas of the farm belt and export tax refunds for small-scale farmers will also favor the cereal.

The government is likely to approve some new-crop export permits during the planting season to spur farmers to plant more wheat, Agritrend's Lopez said.

But while conditions are better than last year, the potential income from wheat is not very enticing, said Francisco Mariani, an analyst at farm-services firm Lartirigoyen.

Only about 20% of the farmers have already made up their minds about planting, with the rest continuing to wait until the last minute to see how things look at planting time, Mariani said.

Source: CME Group