As the crop year already finished, Argentine wheat continues to break
records. This time, the good performance of the local cereal is focused
on foreign trade. New marks in monthly sales to Brazil, the
diversification of export destinations and the growth of the dollars
generated characterize the great competitiveness in this crop.
The world wheat market has been in recent years the protagonist of major
changes compared to what was observed in previous periods. Argentina, one
of the key players in world cereal trade, mainly because of its exchanges
with Brazil, is an important participant in these changes.
Focusing in our country, it can be seen on the basis of the Argentine Trade
Exchange report published by INDEC (Argentine Institute of Statistics and
Censuses) this week that wheat was the product that generated the second
largest increase -in absolute values- in the income of foreign currency to
the country, behind the item of automobile vehicles for the transport of
goods. The year 2017 closed with a wheat’s export value of 2,364 million
dollars, while in 2016 this amount reached 1,838 million. This leaves us
with an increase of US$ 526 million, which translates into an increase of
Cereal exports continue to grow and this is compounded by greater
diversification in sales destinations, which is related to the great
competitiveness that Argentine wheat is showing in the world. In the past
year, external sales were distributed among 48 countries, while in 2016
they were 39, 23 in 2015 and only 12 in 2014. Brazil continues to be the
main buyer of Argentine wheat, but this greater diversification reduces its
incidence in the export market.
Considering the marketing year, which for Argentine wheat goes from
December to November, it is expected that the recently started one will
have the largest volume exported in the last thirteen, with about 13
million tons as estimated by the United States Department of Agriculture
(USDA) in the January report on international trade conducted by the
Foreign Agricultural Service. In this last report, it raised the projected
value in comparison with that presented in December where it was 12.5
million tons. It should be remembered that the USDA includes in this figure
the volume corresponding to flour and other derivative products. If only
grain exports are taken into account, last season 2016/2017, which ended
last November, registered record values reaching 12.8 million tons.
Another remarkable fact of great relevance for the Argentine wheat sector
is the record of imports expected for Brazil. It is estimated that for the
current season this country will acquire 8 million tons of cereal from the
international market. This amount exceeds by 1.15 million tons the average
of what was imported in the previous ten seasons.
Another record related to Brazil, but this time with Argentina as a
protagonist, has to do with exports of this crop to that country. The last
four months recorded the highest value exported to that country in relation
to each respective month of the previous years (2012 to 2017). In relation
to this, it is important to mention the data regarding wheat shipped to
that same destination so far this January, which according to information
from Thomson Reuters, is close to 680 thousand tons. This would be a new
record for the month and represents an increase of 330 thousand tons
compared to the average of the last five years.
Following the analysis of Argentina’s largest trading partner in the
region, it can be seen, unlike what happened with export destinations for
Argentine wheat, that Brazil has concentrated its purchases in Argentina in
relation to previous years. Over the last year, it has decreased its wheat
imports from other countries that have been - over the last few years -
part of its main suppliers. Our country has advanced mainly to the United
States, which has lost competitiveness in the Brazilian market. This can be
clearly seen by analyzing the participations of the different countries in
Brazilian wheat imports. Based on official data from the CONAB, it is
observed that, considering international purchases until November 2017,
Argentina has increased its presence in the Brazilian market in relation to
its average share from the last 5 and 10 years, while the other suppliers
(United States, Canada, Paraguay and Uruguay) have decreased it.
This fact, added to the drop in Brazilian wheat production compared to the
previous season, which according to the USDA would be around 2.5 million
tons less, could be an indication that the country's participation in the
purchases of Argentine wheat will have a higher incidence this year.
According to this week's report from the Global Agricultural Information
Network (GAIN-USDA), about 50% of the exports of the current crop year
would go to the neighboring country.
The loss of competitiveness of the United States is clearly seen in the
evolution of its exports to Brazil so far in its marketing year, which runs
from June to May, in relation to the previous ones. In the 2016/2017
commercial year, Brazil was the eighth country in importance in relation to
North American wheat sales. If you compare the volume exported to date in
2016/2017 with respect to the current season, you see a fall of 90% (in
2017/2018), the biggest drop for this variable among the top 20 wheat
importers in the 16/17, according to data from US Wheat Associates.
Based on data from the same association, we see a strong increase in the
participation of the countries of the Middle East and North Africa in
purchases of US wheat. These imports already accumulate 790 thousand tons
more in the current marketing year than in the last one complete, an
increase of 86%. This is mainly explained by the purchases of Algeria,
which registered an increase of 114% with respect to January of the
previous season and those of Iraq, which were not among the destinations
for US wheat last season and it had already imported 608.8 thousand tons.
Algeria also stands out among importers of Argentine wheat, with a
remarkable evolution. In 2016, this North African country imported 152.3
thousand tons, while in 2017 that figure increased to 1.8 million tons
(10.8 times higher) which led it to occupy the second place as the main
destination of Argentine wheat behind Brazil. Another notable increase is
that of Chile that went from acquiring 250 thousand tons in 2016 to 863
thousand, an increase of 244%.
The week in the local market
In the last week, in the Rosario’s Board of Trade, wheat’s value registered
consecutive increases every day when taking into consideration the
reference prices of the Board of Trade. Last week ended with a quote that
stood at AR$ 3,080 per ton. On Monday it closed with an increase of AR$ 20,
to reach AR$ 3,100/t. The following days successive increases were recorded
for an amount of $50, ending with a rise of $30 to close the week at AR$
3,230 per ton, reference price corresponding to Thursday's operations. The
open price offered by buyers for the cash market without discharged costs
was for AR$ 3,250/t on Thursday.
Regarding the forward contracts segment, February/March wheat was the most
sought by the operators and where the transactions were focused, with a
greater number of active buyers compared to previous week. The open price
for this position reached AR$3,300/t.Something to highlight within the
forwards market is the record of an open value for the wheat of the 18/19
campaign, for delivery in December/January, which reached US$160 per ton.
However, no transactions are recorded at that value, transactions made for
that position would have been specified for higher amounts.