Reforms drive Argentine grain export revival

Argentina has come back to the international wheat market with a bang.

After Mauricio Macri, the new president, fulfilled his campaign promises by scrapping taxes and quotas on agricultural exports as well as devaluing the peso, the country has signalled it is ready to compete on the international grain markets.

The South American country has already surprised traders after winning the tender by Egypt’s grain authority late last month.

“Argentina just came in and said ‘we want to sell’. They completely smoked Russia,” says Matt Ammerman, vice-president of Eastern Europe and Black Sea region for commodity brokers INTL FCStone.

Egypt bought 120,000 tonnes of Argentine wheat after exporters offered the best rates, undercutting Russia, which has been one of the leading wheat exporters to North Africa. “It just says ‘we’re back, watch out’,” Ammerman adds.

Immediately after taking power, the new Macri government announced that taxes on grain and beef exports would be removed, while a 35 per cent tax on soya bean exports and a 32 per cent tariff on soya meal would be cut by 5 percentage points.

The currency was devalued so that the US dollar, worth about 9.8 pesos under the old official rate, is now trading at just under 14 pesos.

Rough calculations on the rise in returns on grains and soybeans show that the value in pesos of wheat and corn without the export taxes is almost double to that under the previous regime, while the uplift in returns on soybeans and soya products is slightly lower at just above 50 per cent.

The country’s policy changes were “expected to increase export sales in the next few months,” according to officials at the US Department of Agriculture’s Buenos Aires bureau.

The country’s farmers, who have been holding on to their crops partly as insurance against rising inflation and partly in protest at the high taxes, have already started to sell.

Argentina’s farmers sold $752m of grains and oilseeds in the last three days of 2015 according to exporter association Ciara-Cec. This was almost double the amount exported in the whole of November.

The changes had been widely expected although analysts and traders are unsure of just how much in exports of grains and soya beans will come on to the market.

Juan Luciano, chief executive of Archer Daniels Midland, a leading US agricultural trader and a large exporter of grains in Argentina, told analysts in November that the “reduction in restrictions and licenses will be positive for our ag services business”.