The Argentine government may restrict corn exports in 2007 to prevent food costs from rising, says Sean Cameron, president of Argentina’s wheat farmers association.
With more corn kept inside Argentina, internal supply will mount prompting prices to fall. Accordingly, chickens will become cheaper as they are fed corn, Cameron explains.
Corn rose to a 10-year high on November 2 at the Chicago Board of Trade (CBOT), when the benchmark maize contract sold for US$344.75.
Argentine president Nestor Kirchner is already restricting exports of beef and wheat to insulate Argentines from rising global food prices and check inflation, which doubled to 12.3% in 2005 from 6.1% a year earlier. Argentina’s inflation rate is second only to that of Venezuela in South America.
“If global corn prices continue up, we could see the government intervene similarly to what it has done to meat and wheat,” Cameron says. Argentina will hold presidential elections in October 2007.
Corn prices are up due to the US diverting more of its crop towards the production of ethanol, he adds.
According to Tobin Gorey, commodity strategist at the Commonwealth Bank of Australia, corn is selling higher as demand for feed and energy is growing strongly.
Also, wheat prices have shot higher on a smaller global crop, he says, prompting corn to follow suit so farmers don ‘t grow more wheat instead of corn.
Investors have been an important buyer of corn futures in anticipation of stronger demand and slower supply, Gorey adds.
“Supply is only just keeping pace with demand,” Gorey comments.