Argentina is set to be largely out of the global wheat market in 2022-23 — participants expect the crop to be even lower than official estimates, with drought and frost causing substantial damage.
Wheat production could be as low as 10mn-11mn t for the 2022-23 marketing year, market participants said this week. This is less than the Rosario Board of Trade estimate of 11.8mn t and the Buenos Aires Grain Exchange estimate of 12.4mn t.
Argentina's exportable surplus would be as low as 3.8mn-4.8mn t in this scenario, given domestic demand pegged at 6.15mn t by the US Department of Agriculture (USDA) and in line with previous years — assuming unchanged stocks.
Most of this surplus is likely to be exported to neighbouring Brazil, leaving a historically low amount of Argentinian wheat for the rest world. Even with Brazil's own production expected to reach a record of 9.4mn t, as assessed by USDA, up from 7.7mn t a year earlier, Brazil's import needs will still be in the 2.75mn-5.9mn t range, depending on its own export pace. Brazil exported a record 3mn t last year, and USDA is forecasting the net importer will export 3.5mn t in 2022-23, which would send Brazil's total import needs above what Argentina alone can supply.
That said, Argentinian wheat prices are much higher than prices in competing origins, and Argentina's constrained supply could mean its prices become unattractive even for neighbouring Brazilian buyers. Brazil has already made rare purchases of Russian wheat in recent weeks, and Argentinian prices could come under pressure should Brazil continue to purchase lower-cost wheat from further afield. Brazil bought 28,000t of Russian wheat in October, and has bought 68,000t in November, based on Russian vessel line-ups.
Argentina's 12pc wheat is being offered at $385/t on a fob upriver basis — significantly more than than Russia's 12.5pc milling wheat, which is being offered at $319/t on a fob Novorossiysk basis.
