Global Issues
AGRICULTURE-ARGENTINA: Yearning for the Days of Plenty
Argentina’s grain harvest, which grew steadily over the last five years, fell by 30 percent this growing season due to the worst drought in a century, a reduction in the area sown, and meagre investment in technology to improve yields.
'The outlook is complicated and very discouraging; we are going to lose markets,' agronomist Fernando Vilella, head of the agribusiness and food programme at the state University of Buenos Aires, and until last October minister of agriculture for the province of Buenos Aires, one of the country’s prime agricultural areas, told IPS.
Longer term prospects are no better. 'The area sown is expected to decrease again next year, so that if weather conditions are normal the harvest will be the same as this year's. If another drought occurs, we will barely be able to meet domestic demand,' the expert said.
According to the Buenos Aires Cereal Exchange's figures from late April, sharp reductions in soy, wheat and maize crops, which make up 85 percent of the country's grain production, mean this year's harvest will be some 65 million tonnes, compared to 97 million tonnes in 2008.
Production of soybeans, the leading export crop and the driving force behind the agricultural boom enjoyed by Argentina until last year, is down by 30 percent. Last year's record harvest of 47 million tonnes is forecast to fall this year to 34 million tones.
'Taking into account the fact that the area planted with soy increased because less of the other crops were sown, it's clear there was a reduction in yields per hectare,' Vilella said. Based on the area planted, a harvest of 50 million tonnes was predicted, but now estimates have been revised downwards to barely 34 million.
The shortfall in wheat production, which will decline from 16 to 8.5 million tones this year, is due to the lack of rain and also to the area sown this year being 22 percent smaller than in 2008. Producers blame this on the lack of incentives at a time when international prices are dropping and a 23 percent tax is levied on wheat exports.
The area under wheat is already the smallest since record-keeping began in the early 20th century, when this country was known as the world’s breadbasket. There are several reasons for this, economic as well as political, Vilella said.
To ensure domestic supply, the centre-left government of President Cristina Fernández has banned wheat exports at fairly frequent intervals.
Argentina is a major world wheat producer and Brazil is its main buyer, but Vilella warned that Brazil may already be seeking alternative sources in order to guarantee supplies. The South American giant is Argentina's main partner in the Southern Common Market (Mercosur), which includes Paraguay and Uruguay, with Venezuela in the process of becoming the fifth full member.
As for maize, production is expected to fall from 22 to 14 million tonnes. 'The area under cultivation has shrunk 22 percent, and there has been a significant drop in yield per hectare because of lack of investment in fertilisers and other technologies,' the agronomist said.
Omar Barzeta, of the Argentine Agrarian Federation (FAA), an association of small and medium farmers, confirmed this explanation to IPS. 'In comparison with last year, production of all grains has declined sharply,' he said.
'This was partly because of the drought, but also due to the lack of incentives. The crop was sown with less than the essential minimum of fertilisers and nutrients, and that is evident because even in areas where rainfall was normal, profits were down because of pests and other problems that indicate scarce investment,' he said.
Caught in a vicious circle, farmers now foresee that they will have less working capital for the next growing season. 'We're going backwards,' Barzeta complained.
Argentine farmers have been affected for months by a drought regarded by the National Institute for Agricultural Technology (INTA) as the worst in 100 years, particularly in the agricultural heartland of the country, the fertile pampas grasslands, which cover a large part of the provinces of Entre Ríos, Córdoba, Buenos Aires, Santa Fe and La Pampa.
But the drought was the last straw for a sector that has been in extended conflict with the government.
In March 2008, President Fernández announced a steep increase in the export tax on oilseeds. The tax was on a sliding scale, so that if international prices fell, the tax would also be reduced.
At that point, and because of the record prices of around 600 dollars per tonne on the international markets, the export tax on soybeans was to be increased from 35 to 44 percent.
But the government was eventually forced to back down because the measure unleashed a standoff with the association of large farming and agribusiness concerns, whose periodic nationwide roadblocks lasted four months and took a heavy toll on the president’s popularity.
After that, the global financial crisis drove down international commodity prices. For example, the price of soybeans, of which Argentina is the third largest producer after the United States and Brazil, fell from 600 dollars per tonne to half that level.
Lower agricultural production will have repercussions on the government coffers. This year, revenue is forecast to be 40 percent less than the 9.4 billion dollars of tax income collected in 2008.
'The government ought to understand that, if it cuts export taxes on maize, for instance, from 23 to 13 percent, with normal rainfall exports would rise from 600 million tonnes to 1.6 billion tonnes, and tax revenue on those sales would increase from 130 million to 200 million dollars,' Vilella said.
However, the authorities have no plans to cut farm export taxes. The agriculture ministry delayed announcing the crop forecasts that are usually published in March. It said that agricultural yields would fall by 30 percent because of the drought, but glossed over the announcement, saying it was a 'preliminary' figure.
© Inter Press Service (2009) — All Rights Reserved. Original source: Inter Press Service