The first half of 2023 saw the second highest level of wheat milling in the last decade

The first half of 2023 saw the second highest level of wheat milling in the last decade

Fertilizer imports fell to 0.9 million tonnes during the first six months of the year. Despite this, wheat planting is proceeding normally, as is milling. Russia’s attacks on Ukraine impact grain prices.

In the first half of 2023 wheat milling reached 3.09 million tonnes, the second highest in the last 11 years

The 2022/23 wheat season was clearly affected by a historic drought, with a 50% drop in production between marketing years. Meanwhile, exports were decimated with a drop of 80% so far in the current marketing year. Meanwhile, at the level of domestic demand, it could be said that wheat milling 2022/23 was clearly not affected. In fact, the cumulative milling of the grain during the first half of 2023 is the second highest tonnage in 11 years for the same period, reaching 3.09 million tonnes and behind the 3.10 million tonnes of cumulative milling during the first half of 2020. The reason lies in the fact that in the face of a fall in local production, domestic consumption needs are prioritized, while most of the adjustment falls on exports.

Sowing for new wheat 2023/24 has progressed slowly but has been virtually completed

Wheat sowing for the 2023/24 season is advancing and is already in its final stages, with crops in good general condition. According to data from the Secretariat of Agriculture, Livestock and Fisheries (SAGyP), progress on the projected area is estimated at 96% of the total nationally, 1 p.p. above the progress of the campaign 2022/23 for the same period, although only 1.7 p.p. below the average of the last 5 campaigns. Some provinces, such as Córdoba, Entre Ríos and Santa Fe, show a harvest advance close to 100%, while the provinces of Buenos Aires and La Pampa are progressing more slowly.

In a context where fertilizer imports fell by 33% in the first half of 2023 and there was less investment, the potential for wheat production in 2023/24 is at risk

In terms of input availability for the 2023/24 season, fertilizer imports during the first half of the year fell by 33% compared to the same period last year. Only 50% of the urea consumed is produced locally, while the rest of the products are imported. However, according to local sources, all urea sales have been halted in recent weeks due to uncertainty over the application of new import taxes, which were confirmed this Sunday with Decree 377/2023. Because Argentina is still in the fertilization season for wheat tillering, demand for urea remained high, but there was not much supply from the market. Moreover, what is currently of most concern is the availability of fertilizers for what will be the maize sowing in the coming months.

According to the decree passed this week, agricultural inputs will begin to pay the tax for an Inclusive and Solidarity-based Argentina (PAIS) at a rate of 7.5% of imports, which generated a sharp gap between local prices and international prices that had been brewing for weeks due to rumours about the new tax and the uncertainty it generated. Although world prices showed a downward trend over the last year, this situation was never fully reflected in Argentina. Although the condition of wheat crops planted for the 2023/24 season is promising, the lack of fertilization could influence and limit the potential yields of the cereal. A recent GEA report indicated that yields in the core area could fall by 10 to 15 qq/ha if fertilization is not completed.

Beyond Ukraine’s export problems due to the breakdown of the agreement, the USDA is already discounting the lowest wheat exports since the 2013/14 cycle for that country

Regarding the international context, the beginning of the week saw a sharp rise in wheat prices on international markets after Russia attacked Ukrainian ports almost daily following its exit from the Black Sea grain agreement on July 17th. During Sunday and Monday, the attacks were concentrated on the Danube River port, damaging grain warehouses and Ukrainian port infrastructure. This generated uncertainty and concern in the market, due to the long-term implications of the destruction of the export infrastructure of a major global exporter.

According to US Department of Agriculture (USDA) data, during the 2022/23 marketing year, Ukraine consolidated its position as the world’s fifth largest wheat exporter, reaching a total export of 16.8 million tonnes and accounting for 7.7% of total world exports. However, these exports fell by 11% compared to the previous season and are estimated to fall by a further 38% in the coming season. This sharp drop is based not only on the current impossibility of exporting by sea following the end of the Black Sea agreement, but also on the difficulties in exporting by land this year due to the regulatory instruments imposed by the European Union to limit grain from Ukraine. This uncertainty is compounded by damage to port infrastructure following daily attacks by Russia.


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