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ARGENTINA'S WHEAT IMPORT POTENTIAL

Prices have been increasing because of the lack of wheat on the local market. Currently millers are paying $520/MT FAS at ports without originating any volume. The new harvest is five months away and millers are uncertain whether they will have enough goods run the factories. If it were only about the pricetag, Argentina could certainly import wheat. Russian wheat is openly offered at $270/MT FOB. Considering a freight rate of about $45/MT CNF, Russian wheat can be sent to Argentine ports for $315/MT. A specialist calculated that the additional cost to introduce the goods into the country would be approximately 30 percent of the price (to cover discharge, taxes, etc). This results in a final price of $409.50/MT unloaded at Argentine ports, well below the $520/MT on the internal market.

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The Farm Crisis

Prices for corn, wheat, soybeans and other commodities have given U.S. farmers cash with which to purchase more farmland. Supported by historically low interest rates and high crop insurance payments, farmers now have easy access to the money they need to close deals. As a result, farmland values in the Midwestern United States have skyrocketed in recent years and they are expected to stay elevated in 2013.

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Eulogizing Direct Payments

Given the federal government's current fiscal condition, the newly imposed sequestration of federal spending, mounting federal debt and several years of record high commodity prices, farmers' direct payments are doomed. They are the favorite cost-cutting target of virtually every budgeter who puts pen to paper to produce a fiscal blueprint, including the Senate and House Agriculture Committees, the Senate and House Budget Committees, the Office of Management and Budget and the Senate Democratic leadership in its sequester avoidance plan. Because of the 2012 Farm Bill's one-year extension, direct payments are like a condemned prisoner waiting out his days on death row. They may be terminated this year -- or, like a prisoner getting a reprieve from the governor -- there may be one more extension. Ultimately, however, they face a lethal fate.

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