Argentina To Plant Smallest Wheat Crop In A Century

Argentine farmers will plant the country's smallest wheat crop in a hundred years this season, according to the Buenos Aires Grain Exchange.

How the mighty have fallen, the world's fifth largest wheat exporter just a couple of years ago, may be forced not only to import wheat but also corn and beef this year the country's largest farmer Gustavo Grobocopatel said in an interview recently.

Farmers there are caught in a "perfect storm" of falling incomes, exceptionally dry weather and political and economic disincentives to plant wheat.

Last season's wheat crop was decimated by drought falling to 8.3 MMT from 16 MMT in 2007. That production came off a seeded area of 4.5 million hectares. This season the exchange predicts farmers will plant just 3.7 million hectares with wheat in 2009. Some analysts are saying that even that is optimistic and that 3.5 million acres or less could get seeded.

"I’m pretty certain I won’t be sowing anything (this year)," said one farmer in the major producing area of Buenos Aires province. Adding that "I’ve never seen so many farmers decide not to sow, or to reduce planting so sharply."

Farmers have seen their incomes reduce sharply from not just a failing wheat crop, but also sharply reduced output of soybeans and corn this season. The corn harvest is expected down 42% this year, and the soybean crop 26% lower, according to the exchange. With a general lack of credit many farmers simply don't have the cash to plant, even if they wanted too.

It's a major concern also that those that do go ahead with seeding intentions will be forced to cut back on fertiliser and pesticide inputs.

"We are slowly going back to the era of the caveman," said the general manager of Granar SA, a Buenos Aires brokerage business in an interview with Bloomberg. "The greatest danger here is that we are going back to the times when farmers cut costs instead of thinking about productivity."

The Kirchner's administration's tinkering with limits on beef and wheat exports is also providing a reason for farmers not to plant. It's a kind of "why grow it when we know we won't be allowed to export it, or taxed heavily if we are" mentality.

It certainly seems likely that Argentina may well become a net importer of wheat by 2010 as at the beginning of the current 2008/09 season there were carryover stocks of around 2.5 MMT from 2007's bumper production. Ending stocks this time round look like being close to zero.