Winter crops suffered because of the pandemic this year, but they will still bring good news to the Argentinian exporters and the State treasury. In the current season, an estimated 17 million tons of wheat will be produced, 2.5 million less than in 2019/20, contracting exportable balances, but good prices will compensate for these drops.
It is expected that exports will reach just over 11 million tons, 20% less than the volume sold in the previous season. However, in a context of rising prices due to weather problems in several producing countries, exports would climb to US $ 2,674 million, the highest level in the last nine years.
A report from the Rosario Stock Exchange (BCR) states that the exportable balance was reduced due to the drought but "the rise in prices makes it possible to project wheat exports for the 2020/21 campaign for US $ 2,674 million, 8% above the year previous". And it underlines: "It would be the highest value since the 2011/12 campaign."
For analysts, the drought is of intermediate severity, with a drop in yields from 15% to 20%. This set the pace of production in a crop that had been recovering in the last five seasons and with good export volumes.
Several consecutive days of rain at the end of October managed to change the mood of the producers, although in the sector they agree that the campaign is already played. "In wheat, the rains are late," said Juan Manuel Garzón, chief economist of the Mediterranean Foundation. And in the face of the new thick crop, he explained that the good humidity levels will allow "regularizing the sowing of corn and soybeans."
"It seems that the worst is over," said the expert after almost a semester without rain, but confirmed that "there will be a fall in export balances." The local market and the milling industry will take between five and six million tons as usual.
For Emilce Terré, head of Economic Studies at the Rosario Stock Exchange (BCR), "there are much more positive prices than between March and May, when they hit the minimum." She explained that wheat is at the best price in the last six years in Chicago, while corn peaked since mid-2016.
This responds to strong demand from China and the lack of water in countries such as Brazil, Russia, Ukraine and the United States, which drives the rise in prices due to lower supply due to lower production. Russia and the US account for 31% of world wheat production.
Also influencing the weakness of the dollar due to the expansionary monetary policy of the United States in the context of the pandemic, which pushed the price of agricultural raw materials. "We are at a decisive moment because corn is being planted," said Terré. Miguel Cané, president of Argentrigo, the entity that brings together the cereal value chain, stressed that "there will be poor production results in all regions", and for this year 16.8 million tons are expected, compared to 19, 5 million of the pre-campaign forecasts.
But he ratified the rise in international prices. "In the Term Market the new crop today is worth US $ 210/215 a ton, three months ago the price was US $ 170 a ton," he said.
For Cané, the lower production is not going to generate supply problems in the domestic market. In any case, the adjustment variable will be a lower volume destined for export, he explained.