Friday, 6 September 2013

Argentina - land of diversity, beef and lots, and lots of soya

Argentina has 35 million hectares of cropping land and 40-45 million head of cattle depending on which figures you use. The country produces 43% of the world's soya meal, which feeds 330 million people. As a nation, the 40million population feeds 400million globally. The stats are staggering; they also hide another story.

Up until 2005, there were over 50 million head of cattle; Argentina was the 3rd largest global supplier of beef, exporting 27% of its production. It now exports just 7% of its beef and the size of the nation's beef herd has fallen by 20%. The main export markets for fresh meat are Chile, Israel and Russia. for processed meat, UK, US and Hong Kong.

The changes to the beef sector, and its exports are resultant of a marked shift in government policy - exports are restricted in favour of supplying the domestic market. 

Argentinians eat a lot of beef, their average annual consumption is 62kg/person, compared with 26kg/head in the USA. Interestingly, 55% of meat is sold through a butcher in the country.

Agriculture is important to Argentina, generating close to 50% of the country's revenues. Like many nations, Argentina is in debt after the economic crises the world has seen, revenues from agriculture in US dollars, is crucial to repay this debt. Yet national and local Government policy doesn't always seem to support the farming sector as the beef industry decline shows. Some other examples are that the export tax on soya is 35%, which seems very high. Plus, some provinces have introduced spraying restrictions of up to 2-3 kilometres from an urban conurbation - potentially a huge area that cannot be conventionally cultivated if this policy spreads to other regions. Some provinces have imposed land taxes at exorbitant rates - one farmer we met in Entrerios has seen a 1000% increase in his land tax in the last 12 months (essentially his rates).

Coupled with the domestic challenges Argentina's farmers have, they are also exposed to the world's commodity markets, which is triggering further changes to farming. At the moment, soya prices are high, so traditional beef rearing land on the productive Pampas is being used for soya production, forcing beef farmers to move north and west to less productive land. Here, on grass, cattle take 3 years to finish on average; in feed lots at much higher cost, it takes 18 months. But because of the costs, many are moving away from feed lot production.

As you can imagine these pressures make it difficult for farmers to plan for the future. There were frequent calls amongst those we met for fair play for farmers and sufficient policy information for them to plan and invest.

Without doubt, Argentina is an important power in the global food supply market (see the land balance slide below). But, their farmers need a government that is wholly supportive to really make the most of what they have and their abilities to produce.

Next blog will be on Argentina and soya. 

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