By the end of President-elect Mauricio Macri’s first four-year term, Argentina will have doubled wheat shipments and surpassed Russia and Brazil as a corn exporter, by some estimates, as the abandonment of years-long trade restraints unleashes the full potential of the country’s vast Pampas farm belt.
Opposition leader Macri beat ruling party candidate Daniel Scioli in Sunday’s election, effectively ending the eight-year, production-sapping feud between farmers and outgoing President Cristina Fernandez, who clamped down on shipments of food-related grains in a bid to damp double-digit inflation.
Macri, who won the backing of the farm lobby with a broad free-market platform, has promised to eliminate corn and wheat export taxes and ditch the quota system that controls international shipments of both crops. He also wants a more competitive exchange rate.
As a result, farmers are likely to begin alternating more often between soybeans and the other crops, not only boosting corn and wheat output, but nourishing the soil as well, aiding soybean yields in the process.
Soy currently grows on 62 percent of Argentina’s cropland compared with about 25 percent in the United States, according to local analyst estimates.
“I planted only about a third of the wheat and corn that I would have liked to this year,” said Santiago del Solar, who manages thousands of hectares in the bread basket province of Buenos Aires. “And this has happened for the last eight years.” He said improved soil thanks to better rotation should allow for soybean output to rise along with that of other crops. Corn and wheat leave mulch behind, which combats erosion.
“We can lower the risk of erosion to almost zero if we rotate crops the way we want to,” del Solar said.
Corn will see the fastest planting area growth next season thanks to a projected improvement in profitability under Macri’s policies, said agronomist Pablo Adreani, who has analyzed Argentina’s grains sector for more than three decades.
He expects farmers will increase their corn acreage from 3 million hectares this season to 4 million in the 2016/17 crop year. Argentina’s corn exports could surge by 44 percent over the next three years to 23 million tonnes, which would make it the world’s biggest supplier after the United States.
Wheat exports may rise from 4.3 million tonnes this season to 11 million by 2018/19, which would be equivalent to about 6.8 percent of global wheat trade, Adreani said.
Even shipments of soy and its derivatives should rise from 45 million tonnes to 52 million in 2018/19, he says.
Argentine farmers and officials across the political spectrum have whole-heartedly embraced genetically modified soy technology, despite controversy over possible health effects.
Modified seeds have contributed to the explosion of soy production on the Pampas over the last two decades and are expected to remain popular with growers well into the future.
Under Fernandez, who is barred by law from seeking a third consecutive term, the country collects a 23 percent export tax on wheat and a 20 percent levy on corn shipments. Exports of soybeans, of which Argentina is the world’s third-largest supplier, are taxed at 35 percent, a levy Macri vows to cut by 5 percentage points per year starting sometime in 2016. In a bid to ensure ample domestic food supplies and keep prices low, Fernandez established a moving export quota system on wheat and corn, which growers say cuts competition among buyers and generates oversupply of the local market. Macri says he will ditch the quota system immediately after his Dec. 10 inauguration. The term is four years with the possibility of one immediate re-election. Macri’s farm policy team sees a 30 percent rise in Argentine grain and oilseed output to 130 million tonnes by the end of his first term in 2019. “The changes could reposition Argentina as a corn producer, with an exportable surplus second only to the United States, as opposed to now, as fourth behind the United States, Brazil and Russia,” said Gustavo Lopez, head of consultancy Agritrend. Factoring in Macri’s policy platform, Lopez said Argentine corn production is set to rise 57 percent to 33.7 million tonnes by the 2024/25 crop year from 27 million in 2013/14. He projects wheat production to leap 54 percent to 18.3 million tonnes from 9.5 million during the same period, and soy to soar 63 percent higher to 72 million tonnes. A WEAKER PESO
Whether the world will crave those increased supplies is another question. International prices are down as grains reserves climb.
Global corn, soybean and wheat ending stocks are projected by the USDA to be the largest ever by the end of the 2015/16 season, following record or near-record crops in the U.S. and South America.
But Argentina’s farmers may be better placed to compete next year thanks to Macri’s pledge to allow the overvalued peso to devalue.
Just as the strong U.S. dollar has made doing business more expensive for U.S. farmers, a cheaper peso would help their Argentine counterparts. “Competitiveness will be restored over the medium- and long- term with the modification of the exchange rate,” said Ernesto Ambrosetti, economist with the Argentine Rural Society (SRA), which represents the country’s biggest farms. He said SRA members are counting on Macri to not only reduce export taxes and ditch the quota system, but to help the sector by reducing Argentina’s double-digit inflation rate and eliminate crop transport bottlenecks by improving highways and paving rural roads that wash out when it rains. “Corn and wheat will start occupying a bigger area,” Ambrosetti said. “That rotation will set the stage for sustainable productivity.”
(Additional reporting by Karl Plume and Julie Ingwersen in Chicago; Editing by Alan Crosby)
This entry passed through the Full-Text RSS service – if this is your content and you’re reading it on someone else’s site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers.
Powered by WPeMatico