Influence of politics on Argentine wheat production

In May of 2008 Argentine President Cristina Fernandez sent to the National Congress a bill known as resolution 125/08, which imposed increases for the export taxes on certain grains, especially for soybean exports, the main crop for Argentine farmers.

This created a strong conflict between the government and the Argentine rural sector, which responded with pickets by the side of the main roads, stopping any trucks with rural exports and several farm strikes which led to lack of supply of rural products in the cities.

Although the bill was not approved, the damage was done: The political conflict created a strong uncertainty among the rural population, reducing the area of crops planted. Other bureaucratic restrictions to exports also had an impact on wheat.

“More than 50% of the fall in wheat production was due to the unwillingness of producers to grow wheat,” said César Gagliardo, president of the cereal trader Artegran. “The rural strike during 2008, the complications for exports, the elevated implementation costs due to the difference between the local currency and the U.S. dollar, and the drought added the ‘government factor’ since the price for wheat was under governmental control and there were hold ups to get the export registers.”

However, the political scenario has changed in Argentina, opening a window for possible modifications in grain-related policies. In the last legislative elections, held June 28, the rural sector managed to gain weight in Congress. Several newly elected legislators are grain and cattle producers or are favorable benefiting the rural sector. Therefore, expectations are high for better export conditions for rural products.