Abstract
In BMI' s 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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