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Argentina Agribusiness Report Q3 2009
Business Monitor International, June 2009, Pages: 54
The Argentina Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on Argentina's agribusiness service.
In the Argentina Agribusiness Report for Q3 2009, we introduce the new Soybean Outlook. Soybean production has exploded in Argentina over the past few decades. In 1970, less than 50,000 hectares (ha) of land was planted with the crop. In 2008, more than 16mn ha were given to soybeans. In the past decade alone, the area harvested has more than doubled, changing the face of Argentinian farming. Prior to the current problems at least, Argentina was the world's largest exporter of soybean meal and oil and third largest exporter of soybeans behind only Brazil and the US.
In 2009, Argentinian agriculture is in crisis. Soybean production has not escaped. We forecast this year's harvest to be 28% smaller than the 2008 crop at 33.23mn tonnes. The long drought in the Southern Cone of South America has seen yields plummet as crops are wiped out by water shortages. The volume of soybeans crushed domestically will also fall this year owing to the tight supplies, though by a much smaller amount. We expect exports of whole soybeans, however, to fall by as much as 50%.
Despite this setback, we expect the rise of soybeans to continue in Argentina once climatic conditions allow. Strong economic growth in emerging markets, most notably China, will see incomes rise and consumption of meat rise alongside. This will keep demand for Argentina's soybean and soybean products exports high. Domestic consumption will also be helped by a new renewable fuels law coming into force next year that mandates for all diesel sold in the country to contain at least 5% biodiesel. We expect the production of biodiesel from soybean oil to rise rapidly this year in preparation for the increased demand.
Despite the rapid fall in soybean production, we do not expect it to be the crop hit worst by the drought. Our forecasts for wheat and corn production are even bleaker. For wheat, we expect production to plummet 50.6% year-on-year (y-o-y) to 8.30mn tonnes while for corn we forecast a drop of 40.0% y-o-y to 12.31mn tonnes. Exports of these crops will fall to the lowest level in years. We expect it to be some time before production of these crops reaches the levels seen in 2008. Farmers have been encouraged to turn to other, hardier crops and the area planted to wheat and corn is expected to fall sharply this year. Less stringent government control on exports has also provided incentives for farmers to move to more minor crops.
Also struggling badly is Argentina's iconic beef industry. With much of the pampas dried out, stock loss has been heavy and slaughter weights are well down. We expect production to fall this year and next owing to the reduced size of the national herd. If the weather doesn't improve soon, production could fall so low next year that imports of beef are required to meet demand. An unheard of situation in Argentina, formerly the world's number one beef exporter.
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