Argentine wheat reform disappoints farmers, so far
Posted by Labels: Agriculture Reforms, Argentina, Payments to Farmers, South America, Wheat* Corn, wheat farmers gripe about below-market prices
* Real test for new rules to come in 2012/13 season
By Hugh Bronstein
(Reuters) - Argentine farmers say they are still being paid below-market prices for wheat despite a new government export system aimed at increasing competition among millers and exporters.
Last month, the government scrapped the unpopular quotas and said the total exportable wheat surplus would be cleared for export in a bid to avert oversupply and low prices for farmers.
The true test of the new system will come in the next season, as a good portion of this year's wheat had already been shipped when the reform took effect. But for now, farmers say they have yet to see any benefit and there is widespread uncertainty in the industry over how it will really work.
"So far, the change is in name only," one farmer told Reuters, asking that he not be identified in order to avoid problems with the government.
"It's what we call 'gatopardismo', which means changing things to make sure they stay the same," the grower said, pointing to the spread between the $165 per tonne that Argentina's farmers are being paid for wheat and the market price of $208 per tonne.
A wide spread also existed for corn, with farmers offered $150 per tonne versus the market price of $199. Soy, which is exported freely from Argentina, was meanwhile operating at a minimal spread of $305 versus $309, according to information provided by the grower.
Cristian Amuchastegui, head of the Rosario grains exchange, said "the wheat market continues not to function".
"We had higher expectations than what has really come to pass," he told daily newspaper Ambito Financiero this week.
Farmers say the lack of an open market kills the profit in growing wheat, thus restricting crop rotation needed to conserve soils used to grow the country's biggest export earner, soy.
Argentina supplies nearly half the world's soyoil, used for cooking and in the booming international biofuels sector. It is also the No. 3 exporter of soybeans, a major source of protein for an increasingly hungry planet.
FACING THE FALLOUT
Concerned parties from grains traders to sovereign bondholders are watching the new wheat-export scheme - which the government says will soon also apply to corn exports - for signs of how the administration will face the fallout expected this year from the sluggish world economy and Europe's debt crisis.
Fernandez is known for unorthodox, hard-to-predict policies.
She won re-election last year promising to deepen the model of her government, characterized by generous welfare spending, state intervention in the markets and import substitution.
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As the global population grows to an estimated 9 billion by 2050, demand for food will nearly double, according to the United Nations. Argentina will be key to meeting that need.
David Hughes - a wheat farmer in the town of Alberti, Buenos Aires province, and former head of industry chamber Argentrigo - said no one expects the government to free the wheat market to the point of risking higher domestic bread prices paid by voters already hit by Argentina's double-digit inflation.
"The government will continue to open exports only when it knows it has enough wheat for the domestic market," Hughes said.
The government has said it needs 7 million tonnes of wheat for the local market this season. The agriculture ministry has estimated a 2011/12 crop of 13 million to 14 million tonnes.
Starting in the 2012/13 season, the whole exportable surplus is expected to be announced at once, rather than gradually. The aim is to induce competition among traders bidding for wheat.
"Farmers will not be as hard-hit as they were under the previous system, but they will still be subject to export limits and the government's arbitrary interventions will continue," Hughes said. "The policy model, aimed at keeping domestic bread prices down by creating oversupply of wheat, has not changed."
Indeed, Argentina's pugnacious price czar Guillermo Moreno, enforcer of Fernandez's interventionist policies, got increased powers soon after the president started her second term in December.
Ernesto Ambrosetti, chief economist at the Argentine Rural Society, which represents some of the country's biggest farms, said the age of state intervention in Argentina was not over.
"Producers continue to have no motivation to invest in wheat farming," he said. "Until you free the whole wheat market, there will be no real competition." (Editing by Dale Hudson)
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