In a three year battle between the Argentine government and farmers, Argentine farmers announced Monday a one-week suspension to grain sales.

“The halt to sales is not expected to significantly impact corn exports since the bulk of the 2010 crop has already been exported, rather this is focused primarily on wheat exports,� said Kurt Shultz, U.S. Grains Council regional director in Latin American and the Caribbean Region.

Argentina produces roughly 14 million metric tons (514 million bushels) of wheat with exports of 8.5 million tons (312 million bushels). Through the establishment of export controls, the Argentine government maintains a steady supply to the domestic market and thus controls inflation.

However, with over half the wheat exported and more than 60 percent of the corn crop exported, Argentine farmers are upset over government polices that curtail exports, depressing grain price, and keeping them from benefiting from the upsurge in grain prices in the international market.

“The lack of transparency and limited number of export licenses means there is very little competition among the companies who control export certificates, driving domestic prices well below the international price,� said Shultz.

“For example, the current export quota for the 2011 corn crop is set at 5 million tons (197 million bushels), one-third of the expected export quota. This means that exporters will have an abundant supply of corn to choose from when filling these export quotas. Given the excess supply, opening the market to exports and allowing farmer to sell to whomever they want – whether domestically or internationally will be encouraged.�

Currently, this one-week suspension is not expected to affect the 2011 corn export program which will not begin until March. However, given the tight international grain supply, any disruption is a concern. Currently, USDA estimates the Argentine corn crop at 23.5 million tons (925 million bushels) with exports of 16 million tons (630 million bushels). However, the continued dry weather is causing the trade to expect a revision downward on both production and export numbers.

“There are some traders who have lowered the Argentine crop as low as 20 million tons (787 million bushels); whether production is that low remains to be seen,� said Shultz. “What is certain is that weather and farmer discontent in Argentina will contribute to further volatility in the second-largest corn export market.�