BUENOS AIRES, July 5 Argentina's government applied a special law on Friday that forces wheat and flour producers to prioritize supplying the local market after shortages pushed up prices on food staples such as bread.
Argentina is a leading global supplier of wheat, and neighboring Brazil is its biggest market.
The Domestic Commerce Secretariat, headed by inflation watchdog Guillermo Moreno, published a government resolution in the official gazette invoking the so-called Supply Law, which could lead to sanctions on the industry.
Wheat and flour producers who have stocks "must take the necessary commercial actions to adequately supply the domestic market, starting on the day that this resolution is published," the gazette stated.
The controversial measure gives the government powers to seize companies' grain, impose fines, shut down plants and even imprison those who fail to comply.
Farmers are seeding the 2013/14 wheat crop, but it will not be harvested until the end of this year. Stocks from the 2012/13 crop year are running low and much of the grain has been exported already under government quotas.
"Unfortunately we don't know where the wheat is," the head of farmer group the Argentine Rural Society, Luis Etchevehere, told local television. "You'd have to ask Moreno, the exporters and the millers."
Growers complain that export curbs on wheat and corn discourage planting of those crops and push farmers into relying heavily on soybeans, which do not face the same kind of trade restrictions.
With prices for flour and bread shooting up in recent weeks, government officials have urged producers, grain elevators and exporters to keep more of their product in the domestic market.
The Buenos Aires Grains Exchange forecasts farmers will plant 3.9 million hectares with wheat this season, while the agriculture ministry estimates about 4 million hectares.
"Farmers are calculating costs to see if they will plant wheat or not (this season). Planting areas will be limited as long as these policies remain unchanged," Etchevehere said.
The head of another farmers' group, the Argentine Agrarian Federation, warned that Argentina may have to import wheat if supplies stay stretched.
"Exporters have some amount of wheat, it's true, but availability is very scarce and there's a risk that we'll get to December ... and have to end up importing wheat from Uruguay," federation president Eduardo Buzzi said.