Productive Capability of Argentina Expands

Summary

Representatives from the USDA's Foreign Agricultural Service traveled in Argentina from February 13-22, 2008 to assess developments in the grain and oilseed industries and the condition of the summer crops. Continuing improvement in producer and business management practices, transportation, and storage are enhancing competitiveness of Argentina, particularly for soybeans.

Argentina’s Advantages in Crop Competitiveness and Business
In general, production inputs are cheaper and less capital is required for both farmers and agribusinesses in Argentina. New land from pasture conversion is ready immediately for row crops due to fertile soils, which hold moisture well and need relatively little fertilizer. Cheaper labor costs and inputs allow Argentine farmers to control pests more easily than American farmers. Cultivating (tillage for preparation and weed control) a hector of land in Argentina can cost only $5 compared to $30 in the United States. New center pivots are being erected within the areas of Argentina where fairly shallow upper water tables can supply good quality water. In some instances, seed companies supply irrigation infrastructure as part of the terms in contracted seed production. Family and community pooling of inputs, finances, and land enhances efficiencies and profits. Risk associated with production is reduced by the use of contract services for the use of land, consulting, planting and harvesting. On-farm storage has improved with silo bags and portable storage bins used not only for forage but for grains such as wheat and corn as well. Agricultural businesses are becoming more prominent and use high technology to improve efficiency throughout the country; for example, seed companies in Argentina grow high-tech seed for use in the United States, and some of this technology makes its way quickly into use on Argentine farms. Thirteen major port facilities along the Parana River, have improved storage capacity with new projects planned. Expansion plans include underground storage and new above ground silos. Central ports near Rosario continue to improve infrastructure with quick discharge railcars that roll over underground storage units. Many facilities are located near new biodiesel plants. Farm truck and single axle pup-truck lifts dump grain faster into grain storage at these ports. Multi-leg grain drops at the ports fill Panamax ships within a day as compared to older southern ports that still take two days. Correspondingly, soybean crushing plants are expanding fixed storage capabilities to take better advantage of these improved port facilities.

Limitations Exist that Constrain Further Expansion
Although there are 13 major ports along the Parana River, there are only 2 grain handling facilities capable of loading a Panamax (50,000 tons) limiting transportation capabilities, even though almost 80 percent of grains in Argentina are exported. Interior rail transportation is inefficient and therefore accounts for only 17 percent of grain/oilseed movement to ports, while trucks account for 75 percent. A shortage of reliable information sometimes inhibits good planting and marketing decisions. Argentina's Secretariat of Agriculture (SAGPyA) has limited information to provide to agricultural markets due to lack of resources and a small network of specialists surveying the crop situation. These specialists sometimes double as tax assessors, and thus may not be getting accurate crop information from respondents who hope to avoid tax liabilities. Non-governmental sources of information such as farm cooperatives and the Buenos Aires Grain Exchange are heavily utilized by participants in Argentina's grain and oilseed markets. Observers of the agricultural industry voice the opinion that taxes collected from agriculture rarely return to improve the agricultural sector; instead, these resources are used outside of agriculture. On the other hand, due to poor accounting, several million tons of transshipments of soybeans and products per year can go unreported through the governmental custom system. This situation is complicated since the Parana, Paraguay, and Plata River system shares international borders with Uruguay, Paraguay, Brazil and Bolivia from which grain can be co-mingled without being properly reported or taxed. In the business sector, all aspects of the market are unionized including machinery operators, truckers, and port loaders, and the government is involved with establishing labor costs.

Argentine Crop Travel 2008 (read more...)

Current USDA area and production estimates for grains and other agricultural commodities are available on IPAD's Agricultural Production page or at PSD Online.