From the hand of his “productive record”, the Argentine wheat has already contributed more than $3.4 billion in exports during the first quarter of 2022, according to a report by the Rosario Stock Exchange (BCR).
According to what was reported by the Santa Fe entity, it comes “more than supplying the domestic market, as well as the various export destinations”.
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“From the beginning of the harvest last December until the end of April, we estimate that wheat exports have already totaled 11.8 million tons. In this way, the historical export record is consolidated, while the tonnage amounts to a figure equivalent to just over 81% of the established balance volume”, he detailed.
With this important level of exports, it is thus that the cereal would have surpassed in April the US$ 3.4 billion in FOB value of foreign trade. “It should be noted that for the months of December to March, the official INDEC data is taken, while for April the volume of exports is approximated with shipment data, taking the FOB prices of March,” the report said.
“Much has been highlighted about the export prices of wheat in the context of the worsening of the Russian-Ukrainian crisis. However, this export record is not explained even in a fifth by the rise in international prices. Comparing the current campaign with the 2020/21 business year, export volumes grew by more than 90%, while average FOB export prices show a 23% rise so far,” the analysis said.
Consequently, almost 83% of the “export record in dollars” is explained by the robust wheat harvest and only 17% by the rise in export prices for this crop.
On the domestic supply side, according to official data from the Ministry of Agriculture, Livestock and Fisheries (MAGyP), so far in the current commercial campaign (December 2021-March 2022), 1.88 million tons of wheat have been milled. This is about 80,000 tons above the same period of the previous year and slightly above the average of the last 5 years.
Last month, more than 2 million tons were added to the accumulated sales of wheat 2022/23, which is already at the threshold of 8 million, which means the “maximum historical record for this time of the year,” indicated the BCR.
Likewise, the entity highlighted that, with this level of marketing abroad, there are about 2 million tons to complete the “equilibrium volume” from 10 million established by the Ministry of Agriculture, Livestock and Fisheries (MAGyP).
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However, after completing 90% of this quota, the DJVE-30 special regime, and the wheat must be dispatched within 30 days of filing the DJVE. “Since this is impracticable in a wheat that has just been sown, then one million tons of foreign sales would remain to complete the current balance volume in the coming months,” analyzed the BCR.
Looking ahead to the 2022/23 campaign, to start in December this year, the United States Department of Agriculture (USDA) published its first estimates of production and foreign trade for wheat in Argentina.
Projecting less planted area and lower yields than the current season, the USDA anticipates a production of 18.6 million tons of wheat for this campaign.
online with a harvest about 15% less, are expected for the next business year 12.6 million tons of exports of cereal, including flour.
More expensive fertilizers
The USDA thus highlighted “the high fertilizer prices as an element of uncertainty when making planting decisions in Argentina, a global fact that our country is not exempt from.”
In this sense, the world fertilizer market remains “substantially volatile” in the context of the Russian-Ukrainian crisis, to which the first Indian tenders were added this week.
“India is one of the world’s leading importers and consumers of fertilizers, therefore, its purchasing dynamics substantially affects the international prices of fertilizers”, recalled the entity from Santa Fe.
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In this way, the emerging power began its purchases without validating the high international prices of ureaessential fertilizer for wheat, while Brazil and the United States persist without buying interest, according to a Fertilizer Engineering report (IF).
Consequently, during the past week there were falls of more than 11% in the international prices of urea. This was also noted in Argentina, where import values to our country fell by 8%totalizing US$ 830 per tonwhen less than 2 months ago a ton of urea was around US$1,100, according to IF data.
Black Sea region production on the rise, although uncertainty remains
According to the Russian consultancy Sovecon, Russia has high levels of wheat stocks in the south of the country, and expects a harvest of more than 87 million tons for the 2022/23 campaign that begins in July this year. “Thus, the coming business year would be the largest wheat harvest in Russian history”, they highlighted.
Thus, a ceasefire in the Russian-Ukrainian conflict would meet “a robust production framework”although it is still pending to quantify the damage to transport infrastructurewhich “could delay the restart of trade if peace is reached.”
In turn, if port logistics can be restarted, the Moscow-based consultancy projects that Ukraine could export 20 million tons in the next campaign, a value similar to the current commercial year, without giving a very strong consideration to the impact of the armed conflict on wheat crops in that country.
In the meantime, Egypt and Turkey, main buyers of Russian wheat, look for alternative suppliers. France and India have recently emerged as important suppliers for these two markets, while the cost of buying Russian wheat remains high due to potential attacks in the context of the war or sanctions on the products.
In this framework, the global demand for the cereal remains firm, with the expectation of continuing its “upward boom” for the 2022/23 campaign. “In the last 20 years, world wheat consumption grew by 34%, showing consumption declines in only 4 years since the beginning of the century,” the BCR recalled.
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However, potential limitations to the export of the crop, within the framework of a drought in producing areas of India, returned wheat in Chicago above US$ 390 per ton, growing nearly 3% during the week compared to the last closing in April. However, current prices remain below the April average, with wheat trading around US$395 per tonne.
For their part, after a sustained net selling position, investment funds changed signs from one week to the next with the warlike outcome of the Russian-Ukrainian conflict at the end of February.
The impact of the war on prices
“As of March, a net buyer position was seen that had not been seen since August 2021. Subsequent closings of positions lowered prices and reduced net positioning,” the BCR analyzed in its report, published on Friday, May 6.
However, during the last 4 weeks, the movement of this position “was scarce in relation to the volatility that had been observed, which could give support to the current price level that has been showing for the cereal.”
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The local market encountered “a week of little commercial dynamism”, with offers around the US$ 370 per tonsimilar values to last week both for “immediate delivery”, as well as for the contractual one.
Las Offers for 2022/23 wheat ranged between US$330 and US$340 per ton. In line with international markets, Matba-Rofex December futures showed gains of around 3% in the week, settling on Thursday, May 5, at US$ 338.5 per ton.