BUENOS AIRES, Feb 24 (Reuters) - A severe drought and export caps are limiting Argentine farmers’ ability to take advantage of spiking wheat and soy prices that have risen due to a spiraling conflict in Ukraine, raising fears over supply from the major European grains producer.
U.S. wheat and corn futures rose by their daily trading limits on Thursday, while soybeans reached the highest level since 2012, after Russian forces attacked Ukraine, exacerbating worries over global supplies.
“The benefits of incremental prices due to the military conflict are very limited for Argentina due to a poor harvest due to drought,” Gustavo Idigoras, head of the CIARA-CEC chamber of grains processors and exporters, told Reuters on Thursday.
Argentina is the world’s top exporter of soybean oil and meal, a major supplier of wheat and the global No.2 corn exporter.
Idigoras said, however, that there was little remaining wheat authorized for overseas sales due to export caps. Farmers completed the wheat harvest in early January. Other grains have been hit by drought since late last year, hurting production.
Argentina’s 2021/22 wheat production reached 22.1 million tonnes, according to official data, but farmers have already sold 15.5 million tonnes of the grain and the domestic demand for wheat is 6 million tonnes.
Idigoras said that with export limits to ensure local supply “we have very little remaining, less than 1 million tonnes, with which we are not going to be able to take advantage of any price or price displacement benefit from Ukraine”.
Russia and Ukraine are the top two global suppliers of wheat, with a combined 29% of world exports.
High prices will nonetheless counterbalance some of the impact of drought, which have led to Argentina’s grains exchanges slashing their harvest forecasts for corn and soy.
“Rising international prices always have a positive impact on producers in Argentina,” said Idigoras, adding that it could encourage Argentine wheat producers when they start the 2022/23 cycle when the Southern Hemisphere autumn has begun.
“There is clearly a positive scenario in this regard, though it will be limited by the weather conditions in the country in the coming months and the prices of inputs, which have grown a lot at the international level,” he added. (Reporting by Reporting by Maximilian Heath; Editing by Adam Jourdan and Lisa Shumaker)
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