Wheat prices are soaring as the Ukraine war sparks a global food crisis. But in Argentina, one of the world’s agriculture powerhouses, farmer Aimar Dimo is cutting back the acreage he devotes to the crop.
“As a producer I feel responsible . . . my work should be oriented towards helping the crisis,” said Dimo, who farms 1,500 hectares in Rufino in the north-eastern province of Santa Fe. But “at a time when we should be selling to the world because it needs us more than ever, we have no confidence or incentive”.
Argentina produced a record 21.8mn tonnes of wheat last year, compared with 25mn tonnes grown in Ukraine. But despite a pledge by President Alberto Fernández last month that the country would seize the “formidable” opportunity to meet demand, its farmers say they are facing a series of deterrents as the May to August planting season is under way.
Chief among them is a strict export quota that Fernández’s leftwing Peronist administration further reduced in March to shore up domestic supplies — a move farmers say runs counter to his pronouncement last month. “Instead of our government stimulating production to make things easier for us, they intervene,” said Hugo Ghio, who farms wheat near the city of Córdoba.
The cost of inputs such as fuel and fertiliser has also risen steeply as the war hits supplies and inflation soars in Argentina’s stuttering economy. Meanwhile, the government recently indicated it was considering increasing the 12 per cent tax levied on wheat exports and potentially introducing a new “unexpected profit” tax on companies that analysts say would hit commodity exporters such as farmers.
Under Argentina’s export curbs, just 10mn tonnes of the 2022-23 wheat crop can be sent overseas, down from 14.5mn tonnes in 2021-22.
Enrique Erize, president of Buenos Aires grain consultancy Nóvitas, said the “disastrous” government decision to reduce the quota meant the world “should not expect anything from Argentina” in terms of helping make up for the big drop in Ukraine’s wheat exports.
Farmers in Argentina have in the past been banned from exporting produce to protect domestic supplies and prices. Analysts said such a move was unlikely this year but they had not ruled it out.
The country has on average shipped between 12mn and 13mn tonnes annually to Asia, north Africa and other Latin American nations in recent years. Brazil is Argentina’s biggest customer in its home region, buying 6mn tonnes annually. Argentina is also one of the few big producers in the southern hemisphere, so the crop comes to market during the second half of the year, helping to fill the gap once northern countries’ wheat has been sold.
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But like other farmers, Dimo said that this year he was likely to sow “well below” the amount he planted in 2021.
Farmers have also been hit by Argentina’s struggling economy. Cut off from most sources of international finance after a record-breaking IMF bailout veered off track in 2019, the government has resorted to printing money to help fund its deficit — fuelling inflation that soared past 65 per cent in April.
While the IMF board signed a new $44bn debt refinancing plan with Argentina in March after nearly two years of talks, analysts say it remains to be seen whether the government can deliver on the loan conditions and secure additional financing from other sources.
Meanwhile, the poverty rate has risen to nearly 43 per cent of the population this year, up from 35 per cent when Fernández took office, according to a report by the Social Debt Observatory of the Pontifical Catholic University of Argentina. This has prompted a series of official price freezes on basic goods such as bread and flour that have cut the money farmers can get for their grain in the domestic market.
Wheat cultivators are already switching to other crops such as sunflowers and barley, according to Agustín Tejeda, chief economist at the Buenos Aires Cereals Exchange (BCBA). Such foods are not as widely consumed in Argentina as wheat so are seen as less at risk of state intervention. They also require less fertiliser and water, making them cheaper to produce, he said.
Farmers said the overall costs associated with the upcoming wheat harvest had increased by 40 per cent. Meanwhile, big distortions in the local exchange rate are adding to the pressure on salaries and transport costs.
The price of chemical fertilisers has led Ghio to reconsider how much wheat to plant this month. “It’s our biggest cost,” he said. “We have enough fertiliser for now, but I’m unsure how much to use.”
Some farmers are already applying less fertiliser than they should, Tejeda warned, putting the size of the crop at risk.
Even if fertiliser prices were to stabilise or restrictions ease, weather conditions would be another challenge as the country emerges from a period of severe drought that ended in February, said Ghio. “There’s not enough humidity in my soil,” he added. “Our autumn was dry, so if I don’t see enough water I don’t plant.”
Back in Santa Fe, Dimo said Argentina should do “everything within reach” to help ease the global grain shortage, adding: “It is our duty as a food-producing nation.”
Source: Economy - ft.com
