Record Argentine wheat harvest reopens Asia market

Dirt-cheap prices for Argentina's record wheat crop have allowed exporters to regain markets in Asia after a two-year lull, analysts say. One of the world's top five wheat exporters, Argentina's 2004/05 wheat output is estimated at 16 million tonnes by the local and US governments, a sharp rise from the previous two years.
So far this season, 27 percent of the 5.6 million tonnes of wheat exported have gone to Asia, up from just 5 percent of total sales during the 2003/04 campaign.
"This is a matter of prices. We have a disadvantage on shipping costs (with other exporters to Asia), but the price gap makes up for that," Mario Garcia, a food markets analyst at the Agriculture Secretariat, told Reuters.
Record output accounts for the low price of Argentine wheat, and some analysts estimate the harvest could reach 20 million tonnes due to greater area seeded and ideal weather conditions.
In the 2002/03 season, Argentina did not sell a grain of wheat to Asia due to a prolonged drought that cut output and virtually reduced its export markets to Brazil and other South American nations.
Two years later, sales have jumped. As of January 21, the United Arab Emirates had bought 450,000 tonnes of wheat, Sri Lanka 330,000 tonnes, Jordan 300,000 tonnes, Bangladesh 200,000 tonnes, Indonesia 150,000 tonnes and Yemen 100,000 tonnes.
By the same date last year, no wheat had been sold to Asian markets.
The US Department of Agriculture forecasts Argentina's 2004/05 wheat exports at 10 million tonnes, up from 9 million tonnes in the prior season.
Despite the commercial benefits, some traders warn that rock-bottom prices for wheat could be a double-edged sword.
"The price of wheat is falling world-wide, and this means that Argentine wheat has to fall further to stay competitive. We are reaching levels at which farmers may say, 'At this price, I'm not selling,'" a trader at an international grains firms told Reuters.
"If that happens, Argentine wheat will lose its relative competitiveness and will start to lose these markets," the trader added.
In prior seasons, even with large harvests, Argentine farmers held onto their grains to wait for better prices.
The steady fall of sales to Brazil, traditionally the biggest buyer of Argentine wheat, has pushed exporters to find other markets. In addition to renewing sales to Asia, Argentina has also regained markets in Africa.