The Argentine wheat milling industry threatened by interest rates, black market, and export taxes
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The chairman of the Argentine wheat milling industry (FAIM) Diego Cifarelli talked with the local media about the crisis that is affecting this industry. The following are the key points of his interview.
Export taxes. Cifarelli comments that the milling industry is paying US$30 per flour ton exported, while export traders pay only US$20 per raw grain per tonne exported. “We are losing competitiveness in this way. Why
Cifarelli asks himself. “It is a hard time for our industry. We are trying to bear
Cifarelli is confident in the Government promise that export taxes will be removed in 2020.
Millers versus traders. Argentina collected 19 million metric tons of wheat this season 2018/19, but export traders have already bought 13 MMT, leaving only 6 MMT, the minimum volume that milling industry needs to supply the domestic market and to maintain the few foreign markets they hold.
Cifarelli explains that industry pays US$20 per ton of wheat above the price paid by exporters, but only 6MMT remains available to be bought, and millers have not sufficient financing resources to buy this volume at once. “The campaign is over, but price not”, Cifarelli synthesizes.
Exports. Finally, last year milling industry exported 700K tons of flour versus 1.2MMT initially projected in 2018. The industry is only able to export to border countries market, like Brazil and Bolivia. “As we pay the raw materials in dollar, the rate of exchange only positively impacts 3%, that is the labor component in the flour exported”, Cifarelli explains.
Interest rates, payment-chain. The commercialization chain is complicated, Cifarelli opines. The farmers are too demanding for a short term payments, while the customers are delaying the payments to the industry. “There is a minimum 30 days term of delay between payments and collection. As interest rate surpasses 60% is impossible to go ahead with any investment or any growth plan”, the official says.
Black market. The chairman of FAIM (the Milling Federation) warns that least one million tons of wheat are commercialized in the black market each year. This is the equivalent to 750K of flour or 20% of the domestic market. Tax evasion is estimated by Cifarelli around AR$11 billion or US$250 million by wheat farmers per year.
Both the interviews gave by Cifarelli to BAE Negocios newspaper and Infocampo website transmitted a critical situation.
Those comments contrast with the optimistic approach of the pro-government newspaper La Nación, that informed about a potential deal between the milling industry and Cuba government to export flour to the island.
The title “Wheat mills deals to invest in Cuba” contrasts with the BAE Negocios’ title “There is not feasible strategic plan with 60% interest rates”.
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