BUENOS AIRES (Reuters) - The surprisingly strong showing by Argentina’s opposition presidential candidate last weekend could prompt higher than expected corn exports at a time when U.S. farmers are already nervous about their competitiveness.
Mauricio Macri defied the opinion polls by easily forcing a run-off with ruling party candidate Daniel Scioli. Macri says he would scrap corn and wheat export curbs and eliminate export taxes on both crops while Scioli keeps his platform more vague.
Farmers say Macri’s policies would be a huge incentive for them to switch some soy fields over to corn after years of neglecting crop rotation due to interventionist government policies that have hammered down corn’s profitability.
Macri, a proponent of free markets after eight years of heavy state controls under outgoing President Cristina Fernandez, has the momentum going into the final vote on Nov. 22. But Fernandez-ally Scioli is still very much in the race.
With this season’s wheat already in the ground, Argentine growers are planting soy this month through December while late planting in the main corn belt extends into the early January dog days of the Southern Hemisphere summer.
The Buenos Aires Grains Exchange had forecast 2015/16 corn planting would fall to 2.7 million hectares from 3.4 million in the previous year — a prediction made before Macri’s pundit-defying electoral shocker on Sunday.
“If the political signals are right, we could see the same corn area planted this year that we had last year,” said Martin Fraguio, executive director of the Maizar corn industry chamber.
That would mean an increase in Argentine 2015/16 corn planting of about 25 percent over current estimates, which would add to the country’s exportable surplus.
So far in 2015, Argentina has shipped abroad 12.9 million tonnes of corn, according to official data.
Increased planting could put Argentina in contention with Ukraine, the world’s No. 3 corn exporter. It could also prompt the U.S. Department of Agriculture to reverse course on its Argentina export outlook for 2015/16, which it trimmed by 1 million tonnes earlier this month to 14.5 million.
That would be a headache for U.S. corn farmers already grappling with a strong dollar. The muscular greenback has meant that growers in main rival Brazil, where the country’s currency has weakened by nearly a third this year, can offer lower prices.
The United States and Brazil are the world’s No. 1 and 2 corn exporters, respectively, followed by Ukraine, which ships around 17 million tonnes a year, and then Argentina.
Spot U.S. corn exports are currently offered around $180 per tonne FOB at the Gulf Coast, some $10 per tonne FOB above Argentine shipments.
U.S. shipments for spring — when the potential size of the 2015/16 Argentine harvest should be known — are being offered around $182 per tonne. Argentine exports are way below.
“The market is showing us that (export quotas) won’t be disturbing the market next harvest,” Santiago del Solar, who farms thousands of hectares in Buenos Aires province, said in an email.
“$140-143 per tonne is better than $130 we had a few weeks ago for April 2016,” he added.
But Solar also cautioned the area planted with corn this season might be restricted.
“We can expect more late-planted corn area this year, but only up to a point because a lot of us already have inputs and fields already prepared for soybeans,” he said.
Soybeans are exempt from Argentina’s export curbs but carry a hefty 35 percent export tax, which Macri says he wants to cut by 5 percent per year.
If export quotas are lifted on corn, farmers’ profits could catapult higher for the 2015/16 crop year, according to industry consultancy Agritrend. A farmer who owns his land could make profits of $672 per hectare on corn, up from $350 currently.
Farmers renting land would make $548 per hectare — more than double the $225 with export curbs, the consultancy said. About 60 percent of Argentine farmland is leased.
A Macri win could also spur planting of Argentine wheat, which goes into the ground in June and July.
“We expect Macri will from day one send corn and wheat export taxes to zero. That’s a huge incentive to plant both,” Fraguio said.
Cuts in wheat taxes and quotas could prompt more sales to Brazil, displacing imports of U.S. hard red winter wheat which have been filling the gap. Concerns over that were cited for part of a pullback in HRW wheat futures on Tuesday.
Reporting by Hugh Bronstein Editing by W Simn