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Argentina Agribusiness Report Q1 2010
Business Monitor International, Dec 2009, Pages: 57
In September, President Cristina Fernández de Kirchner announced the creation of the Ministry of Agriculture, Livestock and Fisheries. The new ministry will replace the agricultural secretariat which was a part of the Production Ministry. The country has been without a full agriculture ministry for almost three decades since the military dictatorship abolished the last ministry in the early 1980s. President Fernández installed Julian Dominguez as the new minister.
The creation of the new ministry is clearly a bid to improve relations between the government and Argentina's farmers. By reforming the structure of the government's agriculture department and installing a new head, President Fernández is hoping to start negotiations with farming groups on a new footing. The move was cautiously welcomed by many in the farming lobby, though they emphasised that a change in form will not be enough to please farmers - constructive negotiations on policy has to follow. Many fear that the ministry will lack clout with decision-making power remaining fully in the hands of the Kirchners.
There have been signs emerging that President Fernández is becoming more willing to compromise with the country's beleaguered farming sector. In September 2009, following strikes by farmers in response to a veto by the government of parts of a law providing relief to drought-hit farmers in Buenos Aires province, Fernández said small and medium-size farms would receive rebates for taxes paid on wheat and corn exports in the 2009/10 harvest year. Following this, in October the Oficina Nacional de Control Comercial Agropecuario announced it would begin issuing licenses for corn and wheat exports following a more-than-three-month hiatus. The granting of licenses will, however, be dependent on farmers committing to supply the domestic market as well.
Whether the government will be willing to further loosen controls on the sector once farmers recover from the current crisis remains to be seen. Grain production is on for another terrible year in 2010, with wheat production likely to be the lowest on record. Drought has seen planting hit multi-decade lows for corn and wheat. To add to the misery of farmers, the dry weather has also contributed to the return of locusts as a major threat to crops. At the end of November, the new agriculture ministry was drafting in the air force to help with crop spraying.
The news is not all bleak for the agricultural sector, however. Much of the fall in grain acreage came owing to substitution with soybeans. We now forecast the 2009/10 soybean crop to be up 60% on the previous year at 51.08mn tonnes. This will see exports of soybeans as well as soybean meal and oil up sharply. With bumper crops also expected in the US and Brazil, the increase in Argentinian production should put downward pressure on global prices.
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