BUENOS AIRES: The scrapping by Argentine of restrictions on grain and oilseed exports will boost wheat and corn plantings – but in part at the expense of soybean sowings, the US government said.
The US Department of Agriculture’s Buenos Aires bureau forecast that the liberalisation of Argentina’s crop export regime to boost shipments of all major crops in the short term.
But on sowings, it could make corn and wheat so much more appealing that farmers switch some land from soybeans – of which they are expected to plant a record 20.7m hectares in 2015-16 – in favour of the grains.
The bureau said that “this situation could potentially lower soybean area and production as incentives to grow alternative crops increase”.
Permit change
The Argentine government lifted its grain and oilseed export control system, which is known as the Register of Export Operations (ROEs), on December 29, having earlier reduced tariffs on shipments.
A new regime will track exports through mandatory reporting, but will not require government pre-approval.
“The status on ROEs for meat and dairy are pending, with sources indicating they will be officially eliminated soon,” the bureau added.
“Local sources report that export sales are already taking place without any restrictions.”
Export boosting measures
The move was the latest in a slew of export boosting measure to be introduced by incoming Argentine president Mauricio Macro, who took power last month.
These measures include the removal of export taxes on wheat and corn, and trim to soybean tariffs, and the floatation of the Argentine peso, which has prompted a sharp devaluation in the currency, making exports more competitive.
In combination, these measures are expected to “increase export sales in the next few months,” the Buenos Aires bureau said.
“This policy change will present producers and exporters a more predictable and stable situation in the flow of agricultural exports.”
Soybean supplies
The election of Mr Macri, who ran on a platform of economic reform, particularly in the key agriculture sector, was initially seen as most bearish for global soybean prices.
Argentine growers have long favoured soybean planting over corn, and huge farmer inventories of soybeans could now be pushed onto global markets.
But the regime change could remove disincentives to corn and wheat plantings in the long term, reducing soybean plantings.
Perverse incentives
Soybeans are Argentina’s most important agricultural export, and permit system has encourage their export, relative to corn, where exports have been tightly controlled to reduce local consumer prices.
As Agrimoney.com reported in October, the permit system produced perverse incentives toward soybean planting,
Analyst Dr Michael Cordonnier noted at the time that Argentina’s high ratio of soybean to corn planting was unsustainable, as agronomy dictates a rotation between the two row crops.
“In the long term, this change will encourage higher production of corn and wheat,” the Buenos Aires bureau said.
Forecasts lifted
Last month the Argentine farm ministry lifted its forecast for corn sowings by 100,000 hectares, although this still leaves sowings down on last year, at 5.4m hectares.
The ministry cited the effect of the reforms as it boosted the forecast.
But there was no sign of a fall-off in soybean sowings, which were also seen up by 100,000 hectares at a record 20.7m hectares.
