Parched soils, lack of credit and anger over government policy could lead Argentine farmers to plant less wheat this year when sowing begins next month in the key global exporter.
Argentina’s last wheat harvest was the smallest since 1982 due to a harsh drought, compounding farmers’ reluctance to plant wheat after two years of government price controls and export restrictions aimed at taming rising food prices.
Global wheat prices have plunged 40 per cent in the last year and that will make the crop even less appealing.
“The big carrot of high prices isn’t there so I think the government meddling may play a bigger role in people’s steering away from wheat,” said Sean Cameron, a farmer from Buenos Aires province who heads the AAPROTRIGO wheat association.
“It would be a great achievement if we managed to plant the same as last year (2008-09), particularly because the land is generally dry,” he said.
Some of the driest areas are in Buenos Aires, which accounts for half the country’s wheat production.
The acute drought that cut Argentina’s last harvest by almost 50 per cent to 8.3 million tonnes has lingered on in many areas as farmers decide how many fields to earmark for wheat.
Last season, sowing area fell by 22 per cent to 4.67 million hectares (11.5 million acres) – the smallest since 1992-93, according to Agriculture Secretariat figures.
That deepened a trend of lower wheat planting in recent crop years in Argentina, historically a top five wheat exporter.
The meagre 2008-09 harvest means farmers have less money to buy seeds and fertilizers for the new wheat season and industry analysts say farmers are suffering a lack of bank credit caused by the global financial crisis.
“Farmers have very little ready cash,” said Fernando Vuelta, an analyst at the FYO brokerage in Argentina’s main grains port Rosario. “We’re going to see a drastic reduction.”
Pablo Adreani, of Buenos Airesbased consulting firm AgriPAC, said a 10 per cent fall in wheat area was possible, especially if rains remain elusive in the coming days.
“Every week that passes without rain could see wheat area fall four or five per cent,” he said, adding that ideal weather might produce a 10 per cent increase despite political uncertainty ahead of mid-term elections on June 28.
The vote is seen as a big test for President Cristina Fernandez, who has been locked in a bitter standoff with farmers for more than a year. Her popularity rankings have fallen and farm leaders hope the ballot could usher in change.
They are backing an opposition bill to cut the grains export taxes at the heart of the row and ruling party losses in the polls would improve the bill’s chance of becoming law.
Fernandez announced cuts to wheat export levies in December, lowering the burden to 23 per cent from 28 per cent, but some analysts say a bigger reduction is the only way to prevent a shrinking wheat area.
“A simple costs versus benefits analysis shows wheat is far from being a viable option for farmers,” Rosario grains exchange said last week in a report.
Revenue from grains export taxes has become even more important for the centre-left government as the economy grinds to a halt.
The 2008-09 harvest turned out to be even worse than the most pessimistic forecasts, but it was the weather that proved the most significant factor despite farmers’ gloom over the farming conflict and government controls on trade.
With parched fields causing alarm in important wheat-farming regions, the weather may again determine area.
“Southwestern Buenos Aires and southern parts of La Pampa (province) are very bad and they’ll probably cut back on sowing,” said weather specialist German Heinzenknecht of the private Applied Climatology Consultancy.
“Some places have improved a but, but others are a long way from having the moisture levels needed for seeding,” he added.