Argentina s grains industry is debating a proposal to overhaul local corn and wheat markets so exporters pay farmers higher prices a reform the government could very well adopt.
The state intervenes in corn and wheat trade now with incremental export quotas and subsidies to local millers, which are aimed at guaranteeing affordable food supplies in Argentina one of the world s biggest grains suppliers.
Officials also set minimum prices, but farmers say they are largely ignored by mills and grain exporters the biggest buyers in the market.
Farmers in Argentina, a leading global wheat exporter and the No. 2 corn supplier, have long sought to change the system. They say it hurts their profits by allotting buyers a certain amount of grain to be purchased, thwarting competition.
The proposed reform, drafted by a farmers federation close to the centre-left government, would keep a cap on total exports to ensure sufficient domestic supply but it would eliminate the gradual quota system.
This mechanism is aimed at making sure exporters will have to pay higher prices in the local market, said Fernando Botta, an analyst with the Agrobroker grains brokerage in Rosario.
Major global grain exporters in Argentina include Bunge, Cargill and Louis Dreyfus.
Under the new system, officials would announce the amount of corn and wheat to be set aside for domestic consumption from each harvest and farmers could sell the rest freely on the local market.
A state-funded agency, administered by grains exchanges, would buy grains from farmers and sell them to local mills and cattle ranchers at a discount. This would eliminate the need for state subsidies, which are often subject to long delays.
This would solve the problem of purchasing grains for domestic consumption, said Omar Barchetta, vice-president of the Argentine Agrarian Federation, which represents small-and medium-scale farmers.
Argentina exported nine million of the 15 million tonnes of wheat harvested in the 2010- 11 season, and it sold abroad 14.5 million of the 22 million tonnes of corn that farmers produced, according to the U.S. Department of Agriculture (USDA).