Soy underpins Argentine economy

Argentinian flagMost of the time what I write about on these pages have to do with food and farming in Canada.

Every once in a while, though, I’m lucky enough to have a chance to experience agriculture in other parts of the world – as I did last month with a fascinating trip to Argentina for the 2013 International Federation of Agriculture Journalists congress.

Much of Canada’s agriculture sector depends on exports so it’s important for us to be aware about what’s going on with other nations who export agricultural products as well. Thanks for reading.

In Argentina, the soybean is king. The country has embraced production of this oilseed like no other, increasing its production from 11.5 million tons on five million hectares in 1990 to 50 million tons on 20 million hectares in 2013.

Over the last decade, they’ve invested over $2.5 billion into developing this sector – so much so that 60 per cent of the world’s soy biodiesel and more than 40 per cent of global soybean oil and soy meal production now stems from Argentina.

Soy is the nation’s leading export, well ahead of the next largest segments, which are cereal production, automotive and petrochemicals.

“Soy is the most important industry in Argentina. We are the most important and leading player in the world in this sector,” said Mario Blejer at the recent congress of the International Federation of Agriculture Journalists held in Argentina.

Blejer is President of ForoPAIS, a not-for-profit organization dedicated to promoting Argentina’s soy industry.

In addition to meal, oil and raw soybeans, Argentina is also a leading producer of secondary soy products such as lecithin, phytosterols and glycerine.

ship being loaded in Rosario
Ship being loaded in Rosario

For the Argentinian government, the soybean industry represents an important anti-inflationary tool and much-needed source of foreign currency since its last economic crisis in 2001 – 2002, economic research advisor Dr. Rogelio Ponton of the Rosario Board of Trade told congress delegates.

And they’re counting on continued growth in their exports, particularly to China, one of their largest markets, to sustain and expand their grain and oilseed production.

To keep pace with changing diets and increased consumer demand for meat, the United States Department of Agriculture is projecting a rise in Chinese soybean imports from an estimated 71.6 million tons in 2014-15 to 102.9 million tons by 2022-23.

“China produces the most pork and poultry in the world and for this they need corn and soy. Argentina is in a great position to supply those needs,” Ponton said, adding that Argentina’s crushing facilities lead the world in efficiency and are not yet producing to their full capacity.

The country has 41 plants with an annual capacity of 48 million tons, compared to Brazil, which leads the globe with 109 plants but only has an annual capacity of 47 million tons.

During the four day congress, agricultural experts also repeatedly emphasized some of Argentina’s other competitive production advantages, including the speed at which farmers adopt new technologies, and the fact that the average soybean in Argentina travels only approximately 300 km from the field to the port of export or crushing facility due to the ring of production around the port city of Rosario.

By comparison, transport from key production regions in Brazil or the United States is more than 1,000 km, they said.

But the sector also faces its share of challenges.

High export taxes on commodities – 35 per cent for soy and 20 per cent for corn, for example – are great at filling government coffers but are hobbling production growth.

The almost singular focus on soy expansion has led to reduced production of other crops and job loss in rural areas; modern soy production is less labour intensive than the types of agriculture it is replacing, such as fruit production, for example.

Intensive soybean production stresses the soil, which makes proper crop rotation and fertilizer use important to maintain soil health and productivity.

However, the majority of farmers in Argentina don’t own their land, choosing instead to rent from other growers who no longer farm themselves, and tenancy agreements are short, only one to two years at most.

This makes environmental sustainability a challenge.

“We are looking for ways to produce more sustainably in Argentina, but we need additional incentives for farmers to replace nutrients. Farmers have to also be economically sustainable so we need policies to help complement our natural production capabilities,” said agri-trend consultant Gustavo Lopez. “But we need foreign currency so we have to continue to grow grains.”

Another limiting factor is infrastructure, not just in Argentina but across the entire Mercosur region, the common market area in South America that also currently includes Brazil, Uruguay, Paraguay and Venezuela.

Argentina’s rail network, ports and roads placed 82nd, 88th and 89th out of 139 countries on a World Economic Forum ranking of infrastructure in 2010-11, said Lopez.

“We are working on improvements, but when you consider the projections for growth, there are still a lot of problems,” he acknowledged.

Eighty-five per cent of Argentinian products are transported by truck and only 12 – 13 per cent by rail.

Trucks lined up at the port in Rosario
Trucks lined up at the port in Rosario
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