Argentina’s policy of capping wheat exports to contain food inflation is having the “perverse effect” of benefiting brewers such as Heineken NV (HEIA) and cheapening feed for pig farmers in China, wheat growers said.
Argentine farmers in an area known in the first half of last century as the world’s granary basket will boost barley planting by 17 percent this year at the expense of wheat, which will shrink to the second-lowest in a century, the Buenos Aires Cereals Exchange said yesterday. Barley isn’t part of President Cristina Fernandez de Kirchner’s export restrictions. The government is considering increasing taxes on grain exports, Lapoliticaonline reported today.
Breweries such as Heineken and Anheuser-Busch InBev NV (ABI), the maker of Budweiser, stand to gain as Argentina lowers one of their main costs, Raul Maestre, the treasurer of Argentina’s wheat growers association said in a telephone interview yesterday. Growers are also attracted to barley as rising corn prices are causing pig and chicken farmers in China to switch to barley as feed, he said.
“Farmers are running away from wheat because of this government intervention,” Daniel Miro, president of agro- industrial consulting company Novitas SA said in a telephone interview yesterday from Buenos Aires. “Barley is an emerging cereal.”
Barley and wheat are competing winter crops that are sown in July and August and harvested in December, according to Buenos Aires-based trader J.J. Hinrichsen. Farmers traditionally opted to grow wheat instead of barley because of its higher value in export markets, Miro said.
The value of domestic wheat in Argentina has slumped below $200 a metric ton, compared with $210 a ton for feed barley, Maestre said. Wheat futures in the Chicago Mercantile Exchange have surged 49 percent since mid-June because of a drought and reached $9.38 a bushel yesterday, the highest for a most-active contract since Aug. 21, 2008. That’s the equivalent of about $345 a metric ton.
Barley, which doesn’t trade on the CME, fetches between $340 and $350 for high-quality cereal bought by brewers overseas and between $300 and $320 for animal feed, Miro said.
Animal feed costs are surging as crop-damaging drought in the U.S. Midwest sparked a rally of more than 50 percent in corn prices during the past month. China’s animal feed importers are lowering their barley quality standards to make up a global grain shortage, Miro said. Saudi Arabia is the biggest importer of Argentine barley because the cereal is preferred as an animal feed to corn, according to Novitas.
Farmers will plant wheat on 3.6 million hectares (8.9 million acres), more than the 2009-2010 crop of 3.56 million hectares that was planted during a drought, according to the Buenos Aires Cereals Exchange. The 2009-2010 crop was the least wheat planted since the exchange began collecting data in 1910. Soil conditions for sowing wheat are at the best in a decade, the Rosario Cereals Exchange said July 18.
By contrast, barley planting has surged to an estimated area of 1.35 million hectares in the 2012-2013 season, compared with 339,000 hectares in the 2006-2007 season when the government’s policies of capping beef, corn and wheat exports were first put in place by Fernandez’s predecessor and husband Nestor Kirchner.
This year’s barley crop is forecast to reach 5 million tons, up from 3 million tons last year, Miro said.
“I wouldn’t be surprised if the government decides to intervene again in the market imposing taxes on barley exportations,” he said. “It would be another mistake, but this government has always taken the consumer side against the producers side.”
InBev’s press department didn’t respond to e-mailed requests for comment sent outside of business hours.
Heineken doesn’t comment on “commodity costs,” said John- Paul Schuirink, financial communications manager, in an e-mailed response.
Alejandra Koser, a spokeswoman for Argentina’s agriculture ministry, didn’t respond to an e-mailed request for comment and wasn’t available to speak, an assistant said by telephone.
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