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U. S., Argentina set for corn export battle

“Our export estimations will probably have to be adjusted down, considering the effect that the drought is likely to have on production.”

– Patricia Bergero, Rosario Grain Exchange

The recent surge in U. S. corn sales could end soon as Argentina, the world’s second-largest exporter behind the United States, emerges with a new crop and already shows signs of aggressively marketing its grain.

Competition between the world’s leading corn exporters could be fiercer than usual with the global recession cutting demand for livestock feed. Feed wheat is cheap and plentiful, putting more pressure on corn.

As of Feb. 5, weekly U. S. corn sales had topped one million tonnes for two straight weeks and set back-to-back marketing year highs. U. S. corn exports surged when prices at the Chicago Board of Trade (CBOT) started falling. Export prices are partly based on futures prices, which are down 10 per cent so far this year.

“It’s the first significant drop in prices since that Dec. 5 low,” said Prudential Bache Commodities analyst Shawn McCambridge in Chicago. “The end-users are going to use these types of price breaks to extend coverage.”

The break in prices came at a time when Argentina was not making new sales, which left U. S. corn to cash in on the increased demand from importers. Corn from Brazil, another major exporter, currently costs more than U. S. corn.

Aggressive marketing

The Argentine government has yet to authorize fresh corn exports but that has not stopped some companies from already booking sales, U. S. grain traders said.

“They can’t even export it yet but you’re already seeing prices out there,” said a U. S. corn trader. “If they don’t get the licences, they can always ship it from another origin.”

Argentine corn for April shipment was being offered at $158 per tonne free on board (f. o. b.) compared with U. S. corn at $165 (all figures US$).

Argentina tightly controls exports to ensure adequate food and stable prices for the country, where about a quarter of the population lives in poverty. Argentina recently halted wheat exports after the worst drought in 40 years slashed production and stopped corn exports several times last year.

Dry conditions have hurt this year’s corn crop, but Argentina is still expected to be a major exporter this year.

“I do think they will start later in the season than they normally would,” McCambridge said.

The U. S. government estimates Argentina will export nine million tonnes of corn this year, down from 15 million last year. McCambridge pegs exports at four million to five million.

The Argentine government has not forecast corn exports but the Rosario Grains Exchange estimated sales at eight million to nine million tonnes. Rosario is Argentina’s primary export terminal.

“The amount of exports will depend of course on having enough supply to offer to the international market. We have to ensure domestic supply first,” said Patricia Bergero, the exchange’s deputy director of economic research.

“Our export estimations will probably have to be adjusted down, considering the effect that the drought is likely to have on production.”

– Additional reporting for Reuters by Hugh Bronstein in Buenos Aires

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