ARGENTINA: RISING FOOD GIANT

Argentina is a major producer of agricultural goods, agriculture being a key sector both for its production scale and for its exports. The country’s territory and climate offer an extraordinary potential, especially for grain and livestock production. Mauricio Macri, who came to power by the end of 2015, has implemented economic reforms that promote trade and investments. FAO foresees that overall production growth in Argentina will lead to higher exports of agricultural commodities in the next 10 years.

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Argentina is the third largest country in Latin America and one of the wealthiest in the region, possessing abundant human and natural resources, highly diversified industries, and a population of 44 million people. The economy of Argentina is the second largest in South America behind Brazil. The size of the economy almost doubled from 2002 through 2011, growing by an average rate of 7.1% each year. The growth in the economy of the South American nation was parallel to the rise in raw material prices during the period. The country presents significant investment and trade opportunities, particularly in infrastructure, health, agriculture, information technology, energy, and mining.

Argentina is one of the world’s leading agricultural commodities producing countries. The country has a solid comparative advantage in agriculture due to its exceptionally fertile lands, especially for cereal and livestock production. It is one of the world’s leading producers of sunflower seed oil, soybeans, honey, lemons, and beef.

Agriculture constitutes 18% of the GDP and 15 % of the labor. 65% of total exports in 2016 were from agro-industry. Agricultural products are exported to 180 markets. There are 17.800 processing industries in the country.

Argentina has experienced considerable macroeconomic uncertainty in recent years, with high inflation and an economic contraction. However, since entering office in December 2015, the Macri Administration has focused on rebuilding investor confidence and attracting investment as key to economic recovery. The reforms to macroeconomic and other policies have begun to stimulate agricultural production. A significant policy change is the removal of export taxes for beef and veal and grains in 2016 and the reduction of export taxes to zero by 2022 for soybeans. Furthermore, in February 2017 the Ministry of Agro-industry created the Fondo Nacional de Agroindustria (FONDAGRO), with a US$109 million budget to finance programmes that improve infrastructure, logistics, competitiveness, health and working capital of all agricultural activities in the country. The reduction, and in some cases the elimination of these export taxes has boosted the production and exports of these key agricultural commodities. In 2017/18 season, the South American country achieved a historical record of 136 million tons of grains and oilseeds production.

Argentina is a top ten wheat exporter and an important supplier for neighboring Brazil. It is the world’s No. 3 soy and corn exporter. FAO foresees that overall production growth in Argentina will lead to higher exports of agricultural commodities. Argentina is an important producer of soybeans and protein meal, with production of both projected to grow by more than 18% over the coming decade. Strong growth is expected in Argentina’s cereal production, with high growth rates for corn (+31%), other coarse grains (+27%), and wheat (+25%) in that period. And also exports of other coarse grains are projected to increase by 56%, while exports of wheat increase by 42%.

WHEAT EXPORT ON THE RISE
Argentina is one of the world’s biggest exporters of wheat and wheat flour and it has the highest per capita wheat consumption in South America. Wheat area has increased as result of the policies put in place by President Macri’s administration. Effects of the new policy on wheat production. Production of wheat has increased by 63%. And the increase in exports is 150% respecting the 2014/15 season and destination of the Argentinian wheat has reached 45 from 23.

The area planted with wheat of the 2018/19 season in Argentina would be up to 5.9 million hectares, from 5.7 million in the previous season, thanks to high cereal prices and a forecast climate improvement after months of a severe drought, according to the Buenos Aires Grain Exchange. In the 2017/18 season, a severe drought of more than four months hit soybean and corn, the country’s two main crops, and generated heavy crop losses and economic damages for local producers. But a normalization of rainfall levels in key agricultural areas replenished moisture in many fields and improved the outlook for wheat planting 2018/19. For marketing year 2018/19, USDA estimates the wheat production at a historic high of 20 million tons driving record exports of 14.2 million tons. The current production record is 17.75 million tons in the 2017/18 season. Exports of wheat in the 2017/18 marketing year (December/November) are forecast close to the record high level of 12.5 million tons traded in the previous marketing year.

CORN EXPORTS AT RECORD HIGHS
Official estimates indicate that about 8.9 million hectares were sown with corn, 5 percent more than the previous season’s level. However, due to area losses resulting from the dry weather and significantly lower yields, the first official forecast puts the 2018 corn output at 42 million tons, 15 percent down from the record level of 2017. At this level, production is still more than 10 percent above the average of the last five years. Exports of corn in the 2017/18 marketing year (March/February) are estimated at a record level of nearly 26 million tons, reflecting larger domestic availabilities and Government’s efforts to boost exports. In the 2018/19 marketing year, exports are expected to decline moderately mainly due to lower national output. And corn domestic consumption is expected to continue its increasing trend, totaling 13 million tons.
SOYBEAN PRODUCTION AT SIX-YEAR LOW
The worst drought in decades has reduced expectations for Argentina’s soy crop to about a quarter smaller than last year. Regarding soybeans, with the harvest underway, production is forecast at a six-year low of 37.6 million tons, 32 percent lower than in 2017, due to lower plantings combined with an expected decline in yields.

The prolonged dry spell and high temperatures also affected the 2018 sorghum crop production of which is forecast at 1.8 million tons, nearly 30 percent lower than the already reduced level in 2017 and more than 40 percent down from the average of the last five years.

ARGENTINA’S MILLING INDUSTRY
According to Argentinian Federation of the Milling Industry (FAIM), the Latin American country has 13.5 million annual tons of milling capacity. There are 196 milling plants in the country. In the 2001-2014 period, over 100 new mills were installed as a consequence of an interesting profitability level fostered by informal competition. However, the milling industry shows low, null and negative profitability due to the unused installed capacity of up to 50% and the existence of unloyal competition. “The most important problem is not the transparency in the business and the excess of capacity; we are very busy in these areas, without any results, it will be very difficult for the future Argentinian milling companies.” had said Diego H. Cifarelli, President of FAIM, in an interview to Miller Magazine in November 2016. Argentinian millers have increased the wheat flour export in recent years. They exported 108 thousands tons of flour in 2013 and export figure rose to 621 thousand tons in 2016. The projected export volume for 2017 is 700 thousand tons. %96 of the Argentinian flour is destined to Brazil and Bolivia.

We also suggest you to read our previous article titled "BRAZIL: COMPETITIVE PLAYER IN THE WORLD GRAIN MARKET".

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