PRODUCTION

Post projects 2015/16 crop output at 12 million tons, slightly lower than the previous season. The area planted/harvested is forecast at 4 million hectares, down 10 percent from the 2014/15 planted area (the final harvested area was 4.2 million hectares due to losses caused by flooding). Based on the current market and policy conditions, farmers are quite discouraged to plant. Many still have a significant volume of wheat stocks in their hands, some because they are waiting for better market conditions and many others (mostly in the wheat belt in center-south Buenos Aires province) because there are basically no buyers. Many farmers´ planting decisions are determined by the "short memory" of how the previous crop season turned out. In this case, most producers are not happy. Recent returns have been negative as wheat price were lower than expected, quality issues existed, and there were losses due to flooding.

Estimates for planting intentions for 2015/16 marketing year vary widely. Post received forecasts of planting intentions ranging from no change to more than 600,000 hectares lower than last year. At current prices and costs, farmers´ returns will be very tight or negative. However some producers are speculating that a new Presidential administration in December 2015 will bring positive policy changes and are planting with that in mind. It will be important to follow how the weather develops in the future, as the southern wheat belt is currently in need of rain. Many producers indicated that they will still plant wheat for rotational purposes, winter soil coverage and the need of cash at the beginning of the summer crop season. Farmers in the center of the country find the combination of wheat with soybean second crop as the best combination. In general, lower technology is expected to be applied as production costs have not come down despite the significant drop in world oil prices. The direct costs of planting wheat are above US$400 per hectare. Many producers expressed interest in expanding barley area instead of planting wheat as returns in the past crop were better primarily because barley does not have export/marketing restrictions.

CONSUMPTION

Consumption for 2015/16 is forecast at 6.15 million tons, slightly lower than the previous year. The demand for wheat from local flour mills to supply the domestic demand is quite stable. What varies within crops is the use of wheat for animal feed, which normally increases in years in which there are quality problems (such as in 2014/15). There are over 170 flour mills in Argentina of which more than half are located in Buenos Aires province. The rest are in Cordoba, Santa Fe and Entre Rios provinces. Under current conditions, flour mills are assured by the government that they will be able to purchase the volume of wheat they need so they do not hurry up to stock product. However, many people think that this system will be eliminated with a new administration taking office in December and that the market will return to normal.

TRADE

Argentine wheat exports for the crop season 2015/16 are forecast at 7.2 million tons. However if new export policies are implemented by a new administration in early 2016, export volumes could be even higher. Currently wheat exports are subject to discretional export quotas announced sporadically. Most contacts in the trade expect that the quota system will be eliminated and that this will make trade flow much easier. In fact, expected high carryover stocks could begin to be reduced. Brazil would be the natural market for the vast majority of Argentina's wheat exports. Some minor shipments are expected to go to other regional markets such as Chile, Bolivia and Colombia.

Exports for the 2014/15 crop are estimated at 5.5 million tons, 1.0 million tons lower than USDA's official number. It is unknown what the final export volume will be as it fully depends on the volumes authorized by the government. There are traders who are quite pessimistic, indicating that a low of 4.5 million tons could be shipped. Export licenses have been coming out very slowly. For the current crop, the government has announced so far 3.2 million tons plus 0.4 million tons from the past crop season which was not exported. Of the total production, farmers have so far sold only 60 percent of the crop due to low prices and to the fact that it is difficult to find buyers. There are some quality problems because of excessive rain throughout the whole of the growing season, but this will not be a problem for export. Traders indicate that exports to Brazil are relatively slow as they had a good harvest and that in the first few months they have supplied their mills mostly with domestic production. In the meantime, Argentina is exporting wheat to Congo, Nigeria, Algeria, and South Africa.

STOCKS

Ending stocks for crop 2015/16 are forecast to drop to 1.9 million tons. The final stocks will depend on the policies which the future administration will take. If they eliminate the ROE system and free exports, we could see stocks fall even further. Ending stocks for crop 2014/15 are increased to 3.2 million tons as post reduced exports by one million tons due to the government's slow pace to provide permits.

POLICY

The current policies that mostly affect grain production and trade are export tariffs and export quotas for wheat and corn. The export quota system known as the Registry of Export Operation, or ROE, was created in 2007 with the original objective of delinking high international prices from local food prices. The ROE system is currently applied primarily on wheat, corn and beef exports. By limiting exports and announcing export quotas without a given pattern, buyers for the domestic market and exporters do not compete for the product, making farmer prices artificially low. Export taxes provide price advantages for local processing industries and animal feed sector. Current export taxes are 23 percent for wheat, 20 percent for corn, 20 percent for barley and 5-10 percent for rice. These policies have reduced both corn and wheat production over the years in favor of soybean production, which is not affected by export quotas. The leading presidential candidates have all indicated that the agricultural sector needs to be reformed and have stated that they would eliminate the ROE and reduce or eliminate export taxes on grains, save for soybeans, upon taking office on December 2015. If such a reform would occur, one would expect an increase in corn planted area and in wheat exports for the coming marketing year. As of now, Post estimates are based on the policies currently in place.

Wheat

2013/2014

2014/2015

2015/2016

Market Begin Year

Dec 2013

Dec 2014

Dec 2015

Argentina

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Harvested

3,500

3,500

4,200

4,200

0

4,000

Beginning Stocks

286

286

2,556

2,556

0

3,246

Production

10,500

10,500

12,500

12,500

0

12,000

MY Imports

20

20

40

40

0

30

TY Imports

2

2

40

40

0

30

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

10,806

10,806

15,096

15,096

0

15,276

MY Exports

2,200

2,200

6,500

5,500

0

7,200

TY Exports

1,601

1,601

5,500

5,000

0

7,200

Feed and Residual

100

100

100

300

0

100

FSI Consumption

5,950

5,950

6,050

6,050

0

6,050

Total Consumption

6,050

6,050

6,150

6,350

0

6,150

Ending Stocks

2,556

2,556

2,446

3,246

0

1,926

Total Distribution

10,806

10,806

15,096

15,096

0

15,276

1000 HA, 1000 MT, MT/HA