Farmers in Argentina are worried that wheat price anomalies are a sign the government is starting to meddle in grain markets just months into its four-year term.
The Agriculture Ministry’s free-on-board reference prices for wheat, used by exporters to pay farmers, are higher than they should be, according to Eugenio Irazuegui, head of research at local grain brokerage Enrique Zeni.
While elevated FOB prices may sound good for farmers, they’re actually bad news. Traders and grain analysts like Irazuegui say such price distortions are a way to kick exporters out of the market, leaving more wheat for local millers. The idea is that the extra supply pushes down the cost of flour-based foods popular among Argentines.
Ever since it became clear last year that the party of former presidents Nestor Kirchner and his widow Cristina Fernandez would return to power, farmers have feared a resumption of anti-export policies.
When last in government, in the late 2000s and 2010s, the Peronist governments curbed wheat shipments to keep flour cheap at home. But the move backfired: In response to being cut off from global demand, farmers across the Pampas growing belt reduced plantings.
The issue of higher prices surfaced late last month, when farmers noticed the government index was about US$20 a metric ton, or 10 percent, above market rates for wheat shipped this month.
Farmers alerted Felicitas Beccar Varela, an opposition lawmaker in the bread-basket province of Buenos Aires.
What’s really concerning the industry is that the ministry is setting elevated prices for the next crop, which is being planted now and will be collected at the end of the year. While the FOB market for the new crop is still illiquid, prices are hovering around US$192 for shipment from November. The government reference price is eight percent higher at US$208.
“Setting high prices is a way of virtually shutting off exports and keeping wheat here, within our borders,” said Juan Ouwerkerk, president of Alfa, a farm cooperative in southern Buenos Aires province.