Government of Argentina announces the creation of a wheat trust to avoid increases in food prices

The Argentine Peronist government announced that it has agreed with flour mills and food producers to create a wheat trust to avoid increases in domestic food prices, at a time when the international value of the cereal is at its highest peak in 14 years after the Russian invasion of Ukraine.

Argentina is a leading world exporter of wheat and its government, which estimated the 2021-2022 cereal harvest at a record 22.1 million tons, was already limiting exports of the grain to contain food prices in an economy with near inflation. to 50% in 2021.

However, due to the conflict between Ukraine and Russia, which together account for 29% of wheat shipments, global prices are at historic levels. In the local market, cereal closed on Wednesday at an average of 32,103 pesos (US$298) per ton, 19% more than a week ago.

“This mechanism responds to the need to decouple prices to protect the domestic market in a global context of armed conflict and with the international price of wheat high and sustained”, the Ministry of Productive Development said in a statement.

According to the Government, the trust would be valid until January 31, 2024 and seeks to focus on the domestic sales prices of wheat flour and dry noodles.

“The implementation of this policy contemplates turning over 800 thousand tons of wheat to the domestic market to guarantee supply and achieve price stabilization of these essential products.”, the statement added.

According to data from the Ministry of Agriculture, the 2021-2022 wheat harvest, whose harvest ended in January, was a record 22.1 million tons.

In turn, the Argentine government has limited 2021-2022 wheat exports to 14.5 million tons. According to official information, until Wednesday exporting companies had declared foreign sales of 13.6 million tons.

negative reactions

According to the statement, the agreement was reached after a meeting between government authorities and the Argentine Federation of the Milling Industry (FAIM), the grain processing chamber CIARA and food producing companies.

However, the list of participants of the meeting does not include the presence of representatives of agricultural associations, which last year carried out commercial strikes due to state intervention measures in the corn and beef export markets.

The leaders of the powerful rural sector, the engine of the Argentine economy and its main source of much-needed foreign exchange, demand a minimum participation from the state.

Last week, before versions of a potential application of a trust, the Buenos Aires Grain Exchange (BdeC) rejected such a measure, which it described as “negative stimulus” for the productive chain.

“Both in our own estimates and in consensus with the entire chain of the crops in question, there are no supply problems for the domestic market.”, said the BdeC in a statement, adding that the incidence of wheat in the prices of processed products is very limited.