Grains behemoth Argentina is pushing farmers to produce more wheat by threatening to crack down on the fast-expanding barley sector, which growers are using as a hedge against export curbs, sources with direct knowledge of the situation told Reuters.
With national inflation seen by private economists at 30 percent this year and global food demand rising, Argentina limits wheat and corn exports to ensure ample domestic supplies.
But farmers say this policy hurts their profits and have shifted toward planting barley, which is not subject to the curbs. While Argentine barley cultivation is soaring, the wheat crop is forecast at 9.4 million tonnes this season - way under the 2011/12 crop year's 14.1 million tonnes.
Domestic Commerce Secretary Guillermo Moreno, feared by business as chief enforcer of the government's frequent market interventions, told exporters this week that further growth in barley farming at the expense of wheat would not be tolerated.
"He said that if farmers keep growing barley instead of wheat he will increase export taxes for barley and curb exports," said an industry source who was at the Wednesday night meeting.
"It is a threat. If wheat plantings keep falling, he will go after the substitute crop, whatever it may be," said the source, who asked to remain anonymous. "But the real issue is the policy model, because the more intervention there is in the wheat market, the less acreage he will get from farmers."
This account was confirmed by another industry leader at the meeting. Neither Moreno nor the representatives he negotiates with talk publicly about their discussions.
WANTED: WHEAT
President Cristina Fernandez has increased the government's role in Latin America's third-biggest economy, putting her at odds with farmers who say she is chasing off investment and keeping the country from meeting its agricultural potential.
Global food markets want more wheat from Argentina to offset recent disappointing harvests in breadbaskets Russia, the United States and Australia.
Lack of corn and wheat - a key ingredient in bread and other staples - could put basic foods out of reach for poorer nations already struggling with the sluggish world economy and high unemployment, increasing the risk of rebellion and other upheavals in emerging markets.
Argentina needs about 6 million tonnes of wheat annually for domestic consumption. The government has approved 3 million tonnes of wheat to be shipped overseas in the 2012/13 crop year, having halved its original export quota due to low supply.
Most of the country's wheat exports go to Brazil and North Africa. At 3.48 million hectares (8.6 million acres), Argentina's 2012/13 wheat area was the lowest since the government adopted its modern record-keeping system 44 years ago.
CAMEL FOOD
Barley output has shot to just under 5 million tonnes, split about evenly between beer barley and that used in animal feed. Production was less than 800,000 tonnes in the 2005/6 crop year, before the government started limiting overseas wheat shipments.
Nearly all Argentine barley is grown for export. Brazil is its top beer barley client while feed barley goes to far-flung destinations including Saudi Arabia, mostly to feed camels, and China.
The government slaps a 20 percent export tax on barley, less than the 23 percent levy on wheat shipments and the 35 percent tax placed on soybeans. Barley is a secondary crop in Argentina, where soy and soy byproducts are the top exports.
Growers say the curbs placed on international wheat sales keep them guessing about how much wheat to plant each season and reduce competition among the exporters who buy their crops.
"If the government keeps insisting on arbitrary export quotas, they will not be able to reach the 5 million-plus hectares that were planted with wheat before the interventions began in 2007," said David Hughes, who manages farmland in the key agricultural province of Buenos Aires.
