Argentina gov. mulls relaxing wheat export limits as supply mounts

Argentina’s government is considering increasing the wheat export quota on the back of expectations of a record crop and bumper stocks that are the biggest ever at this stage of the year, trade sources have told Agricensus Friday.

Argentina is poised to harvest its biggest ever wheat crop amid higher-than-expected yields, with two of the country’s biggest exchanges, Buenos Aires Grains Exchange (BAGE) and its counterpart in Rosario (BCR), forecasting production of over 21 million mt.

Trade sources are expecting the crop to come to over 22 million mt - in line with BCR’s forecast of 22.1 million mt.

That is 24% higher year-on-year and would, if realised, amount to a new record.

With the government reporting stocks of 6.9 million mt at the end of November, the highest recorded at this end of the season, early fears that there would not be enough wheat to meet the initial strong pace of export registrations appear to be unfounded.

Back in October, the government took steps to discourage the pace of export license registrations as it eyed domestic price inflation for the staple amid a rush of export applications.

The government stepped in when, by late October, licenses reached 9 million mt, representing 70% of the total export forecast with two months to go before harvest and tight wheat supply expected in most other producer nations. 

The record stocks and the huge production outlooks have provided assurances and traders now expect the export tap to be turned on.

“The market expects the government to release a new quota. We have 9 million mt so far and with a crop of 22 million mt, the exportable surplus could be 14 million mt... so there is still room to go," an Argentina-based trader said.

“We need to increase the [export] program and they need the dollars, so it would be a win-win situation,” added the trader. 

Sources expect an announcement to follow at some time next week.

The rumours come amid a shortage of good quality wheat in the global market, while Argentina’s origin is currently the world’s cheapest on an FOB origin basis and is pricing competitively on a CFR delivered basis into some of the main buying destinations, such as North Africa.

That means any relaxation of the quota could come at an opportune time, providing supply to end users that currently face limited choice while also meeting Argentina’s need to raise US dollars as the country continues to endure high inflation levels owing to its hard currency debt.

Offers for Argentina's FOB Up River 11.5% wheat for January loading were heard at $295-$300/mt, down from levels closer to $310/mt on a handysized basis at the beginning of December.