Argentina Agribusiness Report Q4 2012Published by: Business Monitor International Published: Oct. 17, 2012 - 73 Pages Table of Contents
AbstractBMI View: Argentine grain production had a generally poor year in 2011/12, with corn, soybean andwheat production all falling year-on-year (y-o-y). This was mainly a function of dry weather as part ofthe La Niña weather pattern. In the midst of concerns around global food supply, Argentina could be asignificant bright spot, with record production forecast for corn and soybean in 2012/13. Furthermore,the country’s once struggling beef sector appears to be finally making some progress towards herdexpansion. Argentina has long since relinquished its position as South America’s pre-eminent foodproducer to Brazil, but the sector remains a vital part of the Argentine economy. Despite this, the poorrelationship between farmers and the government (mainly due to export tax disputes) is likely to continue.Key Forecasts Corn production growth to 2015/16: average 6.5% per year to 31.4mn tonnes. We expect thearea harvested to increase as improved prices and export opportunities arising from increasinglivestock and biofuel production encourage farmers to plant corn. However, some of this growthwill also be due to base effects. Soybean production growth to 2015/16: average 6.0% per year to 52.0mn tonnes. This ismainly due to recent government approval for new types of genetically modified seeds, whichare likely to boost yields over the medium term. Beef production growth to 2016: 28.3% on the 2011 level to 3.2mn tonnes. In 2011/12, thereturn of rain in many areas and the improvement of pastures, combined with firm beef prices,led farmers to start rebuilding herds. Production would most likely be higher if export taxes onbeef, at 15%, were reduced. Much of this growth is due to base effects. 2012 real GDP growth: 4.0% y-o-y (down from 8.9% in 2011; predicted to average 4% fromnow until 2016). Consumer price index: 25% y-o-y in 2012 (up from 9% y-o-y in 2011). Industry Outlook The Argentine government announced two policies in August that will impact future soybean production.First, the government increased the export tax on biodiesel from 20% to 32%, now equal to soybean oiland soybean meal export taxes. The government enacted the policy (which includes reducing the internalreference price by 15%) to reduce biodiesel exports and make domestic biodiesel cheaper. It also wouldincrease the competitiveness of soybean oil exports, which are often compromised as soybean oil isoccasionally converted into biodiesel owing to better returns. Second, the government allowed temporary soybean imports for the first time since 2009. Soybeancrushers have capacity for roughly 50mn tonnes of soybeans, and given the deficiency of the 2011/12crop (at around 40mn tonnes), many crushers suffered from poor margins and subsequently laid offworkers. Crushers are required to purchase 5mn tonnes of domestic soybean for every 1mn tonnes ofimports (mainly from Paraguay) although they are exempt from paying the full 32% soybean oil exporttax, instead paying the value-added portion. We do not expect imports from Paraguay to continue shouldthe 2012/13 crop come in at current expectations. BMI believes that the recent flooding in central Argentina (particularly the Buenos Aires province) willhave little impact on the country’s 2012/13 wheat crop. Concerns mounted after heavy rains flooded8.6mn hectares of farmland outside the capital and forced state governor Daniel Scioli to declare anemergency, allowing agricultural businesses to delay re-paying debts and/or taxes. However, according tothe Buenos Aires Grains Exchange, the flooding impacted areas that are not key growing regions. Indeed,they believe the rains will have a beneficial effect on the country’s grain belt. In particular, the rain willhelp replenish soil conditions at a time when the crop is at a sensitive point in the production cycle. Get full details about this report >> |
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