Argentine wheat prices topped $500 per metric ton for the first time in history on the Buenos Aires Cereals Exchange Wednesday amid short supplies of the cereal.
A 30% jump in local quotes over the last month has halted wheat shipments and left millers fretting about supplies through the end of the year.
The situation brings to mind 60 years ago when the a series of droughts in Argentina led its government of Juan Peron to be forced to import, said local daily El Cronista.
Argentina is a traditional wheat exporter. After crop losses in Russia, the U.S. and Australia, the market was looking for it to step up this year.
However, a wet second half of 2012 damaged Argentina's crop, which was already going to be smaller because of historically low planting. The government initially underestimated these losses, and offered more export licenses than was wise in the first half of the year.
Argentine wheat production was just 9 million metric tons (mmt) last year, down 36% on the year before, according to government figures. An export quota of 6 mmt was announced, which was far too large considering domestic demand is estimated at 6.5 mmt.
The government subsequently lowered the export quota, but a large number of shipments had already gone out.
Argentine is in the process of planting more wheat this year -- planting is about a third complete. The government forecasts a 27% increase in acreage to 9.9 million acres. But that is still nearly a third down on the average levels between 1996 and 2006.
Farmers have been steering clear of wheat over the last five years because of the system of export tariffs and quotas, which reduce margins and makes it difficult to plan marketing.
The same applies in 2013, although excellent prices have stimulated more to take the planting risk.
The jump in wheat prices is already affecting bread, cereal and pasta prices, which rose 5.5% in the week June 10-17, according to Elypsis, an independent consultancy.
Alastair Stewart can be reached at email@example.com
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