In Argentina, the 2017/18 wheat crop year purchases have accelerated
and they have already committed 28% of the estimated production. As a
consequence, the wheat balance sheet shows narrow ending stocks.
Brazil, Argentina’s main customer, might reduce its wheat crop by 28.4%
y/y, while Argentina could harvest 500 thousand tons less than last
year; all of it setting a bullish scenario.
The wheat demand is ahead of the harvesters. The new crop purchases have
already reached 4.5 Mt, against 2.6 Mt as of the same date last year.
During the crop cycle, the price was attractive for farmers; therefore, 3.9
Mt of the total purchases is already priced. Currently, harvest prices are
around USD 170/t. Though it is considered an attractive price, bullish
expectations due to lower new crop ending stocks have slowed down selling.
Brazil, the main Argentinian wheat buyer, could be a key player in
2017/2018 marketing year. Brazilian wheat crop was affected by adverse
weather, resulting in a production of 4.8 Mt for the current season, that
is to say 28.4% below 2016/17 figure of 6.7 Mt (CONAB).
The graph below shows that Argentina has been recovering its role as the
main wheat provider to Brazil. It is estimated that Brazilian imports in
2017/18 could be higher in order to satisfy its demand, which will be
supportive for Argentina’s wheat local prices.
Meanwhile, in Argentina, harvesters have started in the north, showing
productivities above expectations. Some weather events (floods, high
temperatures and hail), in addition to other biotic factors (strong
pressure of spots and rust, as well as some fusarium and aphids), cut back
the national production from earlier projections. According to GEA -
Strategic Guide for Agro, the 2017/2018 wheat production could be between
16.3 and 16.5 Mt, versus last season’s record of 17 Mt.
During the crop cycle, the producers had to do an extra effort to control
the cereal health by applying up to 2 or 3 passes of fungicides,
contributing to revealing which are the seeds varieties with higher
diseases susceptibility. The farmers behavior showed that they are willing
to invest in technology for wheat, while in the past years wheat production
was considered a marginal crop.
The elimination of export taxes and restrictions led to the return of
Argentine wheat to the world market, which is the reason for 2017/18
purchases going ahead and reaching a record for the last five years.
Although the national production could be lower than last season’s due to
adverse weather, it is still showing a high productivity level in
comparison to the previous years. The higher seeding intention, the better
applied technology and the unrestricted commercialization could lead us
into another successful wheat season