Newspaper articles

Optimism among exporters

by María Teresa Morresi
La Nación
3 May, 1997

Consulted by La Nación, two important sellers of wheat showed confidence in the next campaign.

In sectors of seed exports the perspectives of the wheat are considered excellent for the next campaign, with prices that at the moment of harvest are higher than the ones the market nowadays shows if problems with the production of the North hemisphere or Australia are registered.

Anyway, if problems do not occur in other regions, the consulted exporters think it is hard to find prices lower than the price of about 155 dollars per ton that the market nowadays fixes for next January. La Nación talked to the presidents of Nidera, Eduardo Leguizamón, and of La Plata Cereal, Diego Yofre. Both companies are among the principal exporters of wheat.

A World Without stocks

Leguizamón considers that the perspectives of the new campaign are excellent because the stocks of wheat, oleaginous and forage grains are small in the world, due to the absence of stocks in other countries and because the consumption is normal.

With a wide basis of demand - in the current campaign Argentina sold wheat to 49 countries - the remainder for export will be sold ²Without problems and at relatively good prices².

The president of Nidera says that ²we are facing a limitation in the area of sowing in the world, and a demand that grows every year, which offers very good perspectives not only for the wheat but also for other grains. It is very important to emphasize this because the producer is going to sow grains not thinking about the price but in the agricultural capability of his farm²

The price levels that the market expresses nowadays for the next campaign will depend a lot on how some productions in the North hemisphere will develop.

Leguizamón, who thinks possible that prices at harvest time are similar or somewhat higher than the current ones, explains that ³there are productions which are not resolved, as the Hindu production, which depends a lot on the monsoon; there¹s a warming in the Pacific Ocean which is positive for Argentina and the United States and negative for Australia, and the sowing area in Canada seems to be smaller than last year's area, apart from the problems of transport and regulations which do not allow the commercial structure of that country to be up to its remainders for export².

The producer thinks there will be a sowing of wheat between 5 to 10 percent less than last year due to the withdrawal of lands which are not up to cultivation.

But, when it comes to technology, he considers that there will be a bigger application than in the previous campaign. A sign of this is the delay observed in the delivery of machinery for sowing by some of the principal factories of machinery caused by the number of orders. Besides, there¹s financing available and, finally, although prices are not astronomical, they are not bad either.

Diversification of Markets

On the other hand, Diego Yofre stressed some features of the last campaign which are useful to evaluate the future. First, he emphasized that the big harvest of this year gave back to the Argentine wheat its place in the international markets, reaching again points we had forgotten, such as Algeria, Turkey, Egypt, India, Kenya and Tunis, stressing an interesting diversification of destinations. With a production of 10 to 11 million of tons, Argentina is an important regional producer, but over the 15 million it starts to be interesting in other points. Secondly, he mentioned the excellent performance of warehouse infrastructure and transport which allowed to manage a record harvest without problems. The level of efficiency reached by the different sectors in the commercial circuit shows new levels of productivity, as it does the shipment record of 4.2 million of tons achieved last January and February. Yofre estimated that, since deregulation of the activity, the improvement in the efficiency of the whole commercial process has leaded to a reduction of costs over the amounts FOB of between 8 to 10 dollars per ton, which have been transferred to the producer. Another fact that he mentions is the high volatility of the prices due to the critical relation stock-consumption, considering which producers moved wisely, whether withholding stocks or using the markets with term. Due to this fact he foresees a new commercialization record for this year: 20 millions of tons. The president of La Plata Cereal said that although there was a big harvest, prices did not change, and with this an old myth disappears. With regard to the future, Yofre estimated that in the campaign 1997/98 the peaks of prices of 1996 will not be reached.

Maintained Prices

Nevertheless, he added that in average term elements which guarantee maintained prices such as the growth of the world's economy, a rising demand for wheat and problems to establish again stocks of security, are being held.

In respect to sowing in Argentina, he also foresees a reduction, of about 8 percent, and his view concerning prices is that they will depend on the climatic changes, as we could see with a bit of dramatism in the recent frosts in the United States.

With regard to this he added that the climatic situation will continue governing prices as long as there are stocks like the current ones, which guarantee only 4 months of consumption compared to the stocks for a year of the campaign 1988/89.

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