* Local wheat price shoots to all-time high $363 per tonne
* Gov't export quotas based on optimistic crop estimates
* Farmers plant less wheat, trend toward soybeans
By Hugh Bronstein
BUENOS AIRES, June 19 Reduced plantings and bad
crop weather have pushed Argentine wheat prices to all-time
highs, stopping exports cold and leaving local millers wondering
how they will make enough flour to last through the Southern
The local price of warehoused wheat has shot to $363 per
tonne from $219 at the start of the year.
"We've never seen wheat prices like this in Argentina," said
Leandro Pierbattisti, an analyst with the country's grains
warehousing industry chamber.
Demand is strong for wheat from the South American grains
powerhouse after poor harvests last year in Russia, the United
States and Australia. But local reserves are thin after export
permissions were granted by the government based on overly
optimistic early season crop estimates.
The price rally started with early-year reports of bad
weather that hobbled what was already expected to be a weak
harvest due to historically small planted acreage.
Wheat was sown on just 3.2 million hectares last year, way
under the country's historic average of 5 million to 6 million.
And it may be a longer-than-usual wait until the next harvest
due to dry weather in the northern regions.
"Prices are telling us that the situation is very tight,"
said Santiago del Solar, who manages thousands of hectares of
farmland in Argentina's main grains province of Buenos Aires.
"Most years the harvest starts in early November in the
north of the country. It usually rains during the summer in the
north, but this year it didn't, so very little is being planted
there," del Solar said. "So we'll have to wait until December
for wheat to start being collected in the central region."
Farmers are shifting toward soy and other crops to skirt
wheat export curbs that the government uses to ensure ample
Flooding in the Pampas farm belt late last year, followed by
overly hot and dry weather, hurt grain quality and cut the crop
to 9 million tonnes versus 14.1 million the previous season.
Argentina needs 6.5 millions tonnes of wheat for domestic
use, which includes making bread and other staples.
Last year the Argentine government said it would allow
exports of 6 million tonnes of 2012/13 wheat. But bad weather
hurt yields and prompted it to cut its exportable quota by half.
By then it was too late to maintain ample wheat stocks at
"The combination of low quantity and low quality was a toxic
cocktail," Pierbattisti said. "The reserve level of good wheat
in Argentina right now is very low. This will remain a problem
until the next harvest starts."
Growers have already begun planting the 2013/14 crop on what
analysts estimate will be about 4 million hectares, hardly
enough to restore Argentina to its output levels before the
government started curbing exports some five years ago.
The curbs make crop planning difficult, farmers say, and
distort prices by cutting competition among buyers.
The export quotas are high on the list of complaints that
growers voiced when they called a five-day grain-sales strike on
Saturday to protest government trade and economic policies that
they say crush profits.
President Cristina Fernandez has increased the government's
role in Latin America's third-biggest economy by way of trade
and currency controls that have put her at odds with farmers who
say she is chasing off investment and keeping the country from
meeting its agricultural potential.
The government shows no sign of scrapping its policy of
limiting overseas wheat shipments. It has instead sought to
bolster planting by threatening to crack down on the
fast-growing barley sector, which farmers have taken to using as
a hedge against wheat export quotas.
Grain exports are a major source of tax revenue for
Argentina, with the largest share of its wheat shipments landing
in neighboring Brazil.
The farm sector has threatened more protests if Fernandez
does not agree to policy changes.
With the country cut off from the international capital
markets since its 2002 sovereign debt default, and public
spending on the rise ahead of October midterm elections, the
Fernandez government needs all the farm-related revenue it can
Central bank reserves, which the government uses to pay
debts, have fallen 17.5 percent over the last 12 months to $38.3
billion. Fernandez would like to avoid the kind of massive
growers' strikes that shook her administration in 2008, forcing
it to roll back a tax hike that had enraged the sector.
"Farmers can always count on the agriculture ministry to be
ready to listen to them. Our door is open," farm minister
Norberto Yauhar said this week, without offering any specific