World Grain - September 2007 - 80

FEATURE: EMPHASIS ON EXPORT

ment in local grain marketing strategies
and getting farmers to sell their grain in
advance at the market highs."
However, grain prices in Argentina are
less transparent than they are in the U.S.,
where the spot price is figured using the
futures price and basis, which is a measure of local demand.
If an Argentine farmer has a cash price
of $200 per tonne of soybeans for delivery to an elevator, crusher or port, that
final cash price reflects (though it doesn't
necessarily follow) the CBOT price, local
demand and basis at the point of delivery,
though basis is not a term used by grain
merchandisers or farmers in Argentina.
Here's a general explanation of how
that price in that scenario would be
figured:
* The eight or 10 major exporters sell
grain contracts on one of Argentina's two
commodity exchanges (there's one in
Buenos Aires and one in Rosario).

* A grower or elevator, through a broker, then buys the contract.
Though only 10% to 20% of the grain
is actually traded this way, it sets the cash
price for the entire market that day.
Shane Romig, a Dow Jones correspondent in Buenos Aires, said weather, competition between exporters and crushers
for whole grain and government interference also influence prices. The weather
market in Argentina affects the local spot
price and the weather elsewhere in the
world affects the CBOT price.
"The government interferes in grain
markets to depress local prices," Romig
said, mentioning the recent example of
the government's ban on wheat exports
that was implemented to increase local
supply and keep flour prices low.
WHO BUYS THE GRAIN?
Argentine farmers sell their grain
directly to local elevators (private or

cooperatives) or directly to processors,
multinational exporters such as Archer
Daniels Midland Co., Bunge, Cargill
and Louis Dreyfus, or local exporters
such as Toepfer, Nidera, A.C.A., A.G.D.,
Noble Argentina and others.
Argentina has 500 elevators, including 350 that are privately owned, 100
owned by multinational companies and
50 owned by national companies, said
Andreani. While this does offer a lot of
capacity, farmers can only store about
60% to 70% of their grain. "A production-to-storage ratio of 1.5 to 1 means a
lot of grain has to be exported at harvest
and farmers are at the mercy of fall harvest price lows. However, silo bags have
helped a lot."
Silo bags, which cost only about $300
per bag and can store from 200 to 300
tonnes of grain, were introduced in Argentina about 10 years ago as an alternative to permanent storage. They are

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