Despite the dry season, the projected value of 2020/21 wheat exports would be above the previous season
Even though the drought reduced the exportable balance, the rise in prices allows us to project wheat exports for the 2020/21 season for US $ 2,673 million, 8% above the previous year. In case this happens, it would be the highest value since the 2011/12 campaign.
The rains occurred over a large part of the wheat area in our country at the beginning of last week, providing essential millimeters for crops that are going through their critical stage of greater water requirement, corresponding to flowering and grain filling.
The rains in most of the “Pampa Húmeda” region over the past weekend, allowed to stop the collapse in yields, although it is too late to make up for the deficiencies in their development in regions most affected by the drought, mainly towards the north of the country.
The latest production update at the national level of the (GEA – Strategic guide for agriculture) projected a total production of 17 million tons, far from the 22 million tons that were forecasted at the beginning of the campaign. This reduction has a direct impact on the exportable balance for the season, now estimated at 10.2 million tons, which implies a 17% drop compared to last season, marking the lowest record since the 2015/16 season.
However, even though the outlook is unfortunate for those who had to resign their lots or project a yield that in many cases will not cover the implementation costs, on a macroeconomic scale, the rise in international cereal prices still makes it possible to project growth in the value of Argentine wheat exports. In effect, the drought that is affecting key productive areas at a global level has propped up world wheat prices, also driving up FOB prices from our ports, allowing the aggregate to more than offset this drop in volumes. If we compare the FOB price of bread wheat to be shipped in the Up-River in December against the one in force on the same date last year, we can see that the FOB price has grown almost 35% year-on-year.
Despite this important improvement in prices, the general conditions lead to caution and the export sector has sold, to date, the lowest volume of the last three seasons, as recorded in the Register of Affidavits of Foreign Sales (DJVE). Currently, it has declared 4.26 million tons to ship from December, 40% below the 2019/20 campaign on the same date, and 30% below the 2018/19 season. Domestic purchases of the cereal are slightly below the previous year. Currently the industry and exports have bought 5.4 million tons of new wheat, equivalent to 32% of the total supply estimated for the 2020/21 season (4 p.p. below the proportion acquired at this date the previous cycle). The percentage of businesses with a firm price, on the other hand, is around 18% and in line with the average of the last 5 campaigns.