Bolsonaro makes a concession to Trump and affects Argentine wheat – 03/20/2019

The President of Brazil, Jair Bolsonaro, granted Tuesday a quota of 750 000 tonnes of wheat imported free of charge into the United States. This was the main offer that the new Brazilian president had made to Donald Trump at the meeting that they had had yesterday at the White House. The decision was anticipated by Clarin.

This is a very sensitive issue for Argentina, whose trade balance with Brazil strongly supports wheat exports, which enjoy a tariff preference of 10% since the agreement of Asunción, at the origin of Mercosur. Local producers and commercial agents fear that quotas will affect the price of Argentine wheat, just as the peak of Brazilian imports is expected.

Look also

Clarin Bulletins

What happened today? We tell you the most important news of the day and what will happen tomorrow when you get up

Monday to Friday afternoon.

Brazil is the world's second largest importer of wheat and therefore its market is very attractive to the world's major producers: United States, Canada, European Union, Russia, Australia and of course Argentina. Brazil it only produces 40% of what it consumes. Its domestic market is 12 million tonnes, but it is difficult to harvest more than five, despite its persistent efforts to achieve self-sufficiency. Wheat is a typical cereal of cold temperate zones, which is lacking in Brazil. Although genetics creates new opportunities every day, the reality is that today they must acquire between 6 and 7 million tons per year.

Every year, Brazil acquires a certain amount of wheat abroad, in response to the demand for certain qualities that Argentina does not possess. But Brazilian millers they must pay the agreed price (10%). For years, the Abitrigo factory has insisted that this tariff be eliminated. In the K era, Argentina's export policy gave them arguments for a temporary exemption, as our country could not provide them. Whether for lack of exportable balance or because of export restrictions, they found themselves on the fast track to import duty-free.

Look also

But since he has badumed the Cambiemos government, the terms of free trade have been restored. And the removal of holdbacks has allowed for strong growth in production and an exportable balance. This year, we realized a harvest of more than 19 million tonsalmost twice as much as five years ago. A good part is already shipped, but there is more than five million tonnes, exactly what Brazil had to buy.

Some local operators say that exports are not committed, which is true. But there are several topics of enormous gravity: first, the quota of 750 000 tonnes without fare is not swallowed from one summer, but it is here to stay. It's an annual fee. Secondly: in the short term, this implies a bearish pressure on the market. Although this represents 15% of our exports and exports are not threatened, the decision sets a ceiling price. This is precisely what the mills of the neighboring country are looking for. Indirectly, this will also affect flour exports, although local millers may be favored if the price of Argentine wheat falls.

But most importantly, it is important to emphasize, with ample evidence, that Bolsonaro has a clear vocation to prioritize its relationship with the United States vis-à-vis its main Mercosur partner. That's why yesterday, at the Argentine Foreign Ministry, all alarms were triggered. At the end of this edition, a stern response and an urgent appeal to Brasilia were badyzed.

Look also

The owner of the Grain Exporters Center, Gustavo Idígoras, recognized at the last minute of this Tuesday Clarin that the situation is serious and concerns a key product for Argentina, where wheat and maize had become the most dynamic products in the export mix. And he noticed that the work is done side by side with the Chancellery to face the argument.