Changes in Government Strategy Mean Changes in Argentina's Agricultural Sector
President Macri’s election in Argentina heralds a new economic vision – opening up international trade and providing renewed impetus in the agricultural sector.
Political and Market Changes
The election President Mauricio Macri, in December 2015, has imposed a new economic vision for Argentina – one which promotes greater international trade and provides stimulus to the agricultural sector. As part of his initiative, soybean export tax has been lowered by 5%, while tax imposed on the export of corn, wheat, sunflower, and other regional crops has been eliminated. The removal of foreign exchange restrictions had the immediate effect of devaluing the local currency by 40% against the US Dollar, but it is hoped that improved profitability for the farmer will partially compensate for the drop in the international price for grain.
Worldwide, wheat production will be at a record level in 2015/16, with a significant recovery in stock levels. In Argentina, attention has been focused on the removal of the export tax and the opening up of exchange stocks. Argentina has also benefited from the excessive rainfall experienced in the southern region of Brazil, a large area of wheat production, which has created problems of quality and delays in harvesting. This will be beneficial for Argentina, where high levels of wheat production have traditionally resulted in surpluses being exported to Brazil.
In Argentina, future corn prices are at parity against the theoretical FAS and it is expected that, due to good harvest predictions, there will be a good offer for the months of June, July and August.
SoybeanLocally, the trade in soybean has been affected by the formalised reduction of 5 percent in export tax, along with the devaluation of the peso. It is expected that devaluation may have negative consequences for international prices, due to an excess of soybean being offered onto the market. According to data from the Agriculture Ministry, it is expected that the 2014/15 campaign will sell 14 MMt. This is in addition to the 9.8 MMt from the 2013/14 campaign.
During this growing campaign, crops have suffered from heavy rains and a hot summer. In addition to this, 'El Niño' has brought a succession of storms, floods and hail that have affected some regions and individual areas. It is predicted that these conditions will continue for the rest of the summer and probably on into the autumn.
Our climatic conditions have led to a good provision of water, allowing for record yields of corn, similar to the harvests experienced in winter crops like wheat and barley.
On the negative side, there is also higher pressure placed upon crops from resilient weed-types. These have been seen in most soybean crops, and have made weed control a primary issue for farmers.
At this stage, the winter crop is already harvested. As a result of low profit expectations, a reduced area was planted, resulting in production of less than 10 MMt, of which, less than 4 MMt was exported. New government initiatives are expected to result in an increase in the area planted during the next growing season.
Most regions have reported higher yields, but lower quality crops, in terms of protein percentage.
During January, the corn crop is at stage R3 filling grain and most regions are reporting crop conditions of good to excellent. At the same time, late corn crops are currently evolving very well, with only 3% of them still to be planted.
The planted area is similar to the previous campaign and so, with yields predicted to be comparable, it can be concluded that production will match, or exceed, previous volumes.
Seeding is almost finished in all of the regions (98% of projected growing areas). The crop is currently at the flowering stage, which remains the most critical phase of growth. So far, very little negative pressure has been reported in the majority of growing areas. Small areas of the South-west region have reported difficulties, including flooding, leading to loss of crops and infrastructure. This may, however, be a temporary condition and may not affect the final picture.
Most regions are currently in good to excellent condition, with neither insects nor fungus affecting crops have been noticed.
We predict that last year’s high yields will be maintained, but that issues of low protein content will remain.
Chart of Grain Production for This Campaign in Argentina
|CROP||AREA PROJECTION MHAS.||PLANTED ALREADY||ESTIMATED YIELD||PRODUCTION||VARIATION|
||2014/15||2015/16||%||T / ha.||2014/15||2015/16||%|
For further information, please contact:
Juan Fernandez Castro
t: +5411 4124 2061