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Argentina mulls next step as corn prices soar

Published on 23 November, 2006, Last updated at 10:37 GMT

By Helen Popper

BUENOS AIRES, Argentina - Argentina, which suspended corn export permits last week, is considering further steps aimed at shielding local buyers from high global prices, government and industry sources said.

The world's second-largest corn supplier after the United States, Argentina closed its export registry due to a flood of requests from exporters before farmers have even finished sowing the 2006/07 crop. The center-left government has already taken steps to try to cool wheat and beef prices.

Argentina normally exports about 60 percent of its corn production. Corn is a key feed source for the growing poultry and livestock sectors and, with global prices at 10-year highs, the government is concerned about the impact on local costs.

"What's being sought is (a measure) that doesn't put the interests of any one link of the production chain above those of another, be that buyers, producers, exporters or processors," a government source said.

The source said officials were considering an option similar to that planned for the wheat sector, where a new resolution will oblige exporters to provide local millers with cut-price wheat. "It would be fair (to say that's being considered)," the source said.

Newspaper Clarin said the step could see local buyers pay between 270 and 280 pesos ($87-91) per tonne for the grain, compared with the 395 pesos ($128) paid in the port of Rosario on Wednesday.

Enrique Erize, an analyst at the Buenos Aires consultancy Novitas, said current prices would increase the government's take of export taxes, allowing it to subsidize local consumers.

"The only solution is to let the market operate freely ... If the government wants to keep the corn price relatively low for domestic consumption they can do it. They've got the resources via export-tax revenue," he said.


The country's farmers are still planting 2006/07 corn and the U.S. Department of Agriculture forecasts a harvest of 17.5 million tonnes, with exports of 11.5 million tonnes.

When the government closed the corn export registry late last week, more than 10 million tonnes had already been listed by exporters. Industry analysts say that while the government may be considering further changes to the export registry process, last week's suspension was largely self-defeating.

"The message (sent by suspending the registry) caused a very bullish market (and) it was slow in coming because 10 million tonnes had already been already declared," Erize said.

That was echoed by Juan Gear, president of the corn association, MAIZAR. He said exporters had only registered so much corn because they feared export limits or tax rises.

"Now the (registry) is closed, but we'll have to see with what model it reopens," Gear said, referring to speculation the government might reduce the notice period for export permits from one-year to six or three months.

Among leading corn consumers in Argentina are beef farmers who use feedlots to fatten their animals. But Rodrigo Troncoso, the head of a feedlot industry group, said cattle ranchers would rather the government stopped trying to cap beef prices than give them a source of cheaper animal feed.

"The cost of corn is complicating production, but not as much as the meat price ... the government is setting a beef price far lower than it should be," he said. "Corn has the price it has to have."


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