Election Uncertainty and Drought Postpone Wheat Sales in Argentina

Argentina is currently witnessing a notable deceleration in the pre-sales of its forthcoming wheat crop, marking the slowest pace in seven years. Several factors, including farmers awaiting improved rainfall and political uncertainty tied to the upcoming presidential election, have contributed to this trend. Additionally, the pledges made by certain presidential candidates to reduce taxes on wheat exports have introduced an element of speculation and further influenced farmers' decisions. The outcome of the election and the subsequent agricultural policies of the winning candidate will be pivotal in shaping the future of Argentina's wheat sector, which plays a significant role in the country's agricultural landscape.

Argentina is renowned as a major exporter of wheat, in addition to soy and corn. However, the latest government data, as of September 13th, reveals that pre-sales for the forthcoming 2023/24 wheat harvest have reached just 1.51 million metric tons. This figure represents a significant departure from previous years and marks the slowest pre-sales pace since the 2016/17 season. To provide context, during nearly the same period in the previous season (2022/23), pre-sales amounted to 5.28 million tons, as reported by the farming secretariat.

The sluggish pace of wheat sales can be attributed to a combination of factors, with political uncertainty taking center stage. Argentina is on the cusp of a presidential transition, with a new administration slated to take office in December. As a result, three primary candidates are contending for the presidency, and their respective stances on agricultural policies, particularly regarding grain export taxes, have stirred speculation within the farming community.

Miguel Cane, President of the ArgenTrigo grains chamber, acknowledged the role of political uncertainty in impeding wheat sales, stating, "The low sales are due in part to the political uncertainty regarding the new government." Cane further explained that there is speculation in the agricultural sector that taxes on wheat exports may see reductions during the upcoming harvest period. This anticipation has played a pivotal role in influencing farmers' decisions regarding pre-sales.

Among the presidential candidates, two have pledged to eliminate wheat export tariffs, which are currently set at 12%. These candidates include Patricia Bullrich, who aligns with the conservative faction, and Javier Milei, an outsider libertarian who currently holds the lead in the polls. Their commitments to reducing taxes on grain exports have garnered significant attention and support from segments of the farming community.

In contrast, Sergio Massa, the ruling party's economy chief and another prominent presidential candidate, has not made a similar promise regarding wheat export tariffs. This distinction underscores the divergence in policy approaches among the contenders and further contributes to the uncertainty surrounding the future of Argentina's wheat sector.

Looking ahead, the Buenos Aires grains exchange has offered its projections for the 2023/24 wheat harvest, forecasting a production of 16.5 million tons. While this estimate represents an improvement compared to the previous season, which was marred by drought conditions, it remains below the peak production level of 22.4 million tons achieved in the 2021/22 season.