September 2009

Argentina May Need To Import Wheat And Beef In 2010

Internal documents from the Argentine Minister of Agriculture pointed out that Argentina may actually have to import wheat and beef in 2010 to meet domestic demand! The very fact that this was even mentioned is an astounding development. Argentina was the world’s leading exporter of beef fifty years ago and of course its wheat crop was one of the leading exports of the country. Granted, the extreme weather of this past year has played a part in this debacle, but I would give equal blame to the misguided policies put in place by federal government.

Several years ago, the government severely limited beef exports in order to oversupply the domestic market in an effort to keep domestic prices in check. Well, it worked. Cattle prices plummeted and in response, cattle ranchers cut back on their herds. The cattle herd in Argentina is usually in the range of 55-60 million head, but in 2010, it is projected to fall to 48 million. Additionally, once cattle ranchers saw that there was little hope for the prices to rebound any time soon, they plowed up some of their pastures and converted the land to primarily soybean production. This has pushed cattle production more and more to the fringes of the humid pampas where the carrying capacity of the land is not as high. So even if cattle prices would rebound, which I do not anticipate, it will take longer than normal to rebuild the nation’s cattle herd.

The government has done the same thing to wheat production. It has restricted wheat exports and increased export taxes. The acreage of the 2009 wheat crop is expected to be the lowest in a hundred years! In 2007, Argentine farmers planted 4.5 million hectares of wheat and the total production hit 16.3 million tons. In 2009, the wheat acreage is expected to fall to 3.5 million acres (if not lower) and if there is an average yield of 2,000 kg/ha, the total production would equate to 7 million tons, which is barely above the domestic consumption of 6.5 million tons.

The wheat situation in Argentina could have more ripple affects than the problem with low beef production. Brazil cannot produce enough wheat to meet their domestic demand and in most years, Brazil purchases all their imported wheat from Argentina. If Argentina has no wheat to export, then Brazil (and maybe even Argentina) will have to purchase wheat on the world market.

It is unbelievable what the Kirchners have done to the agricultural sector in Argentina. Argentina should be a powerhouse in world agriculture. They have fertile land, a favorable climate, and agricultural know-how to be a leading producer and exporter of soybeans, corn, sunflowers, beef, and related products, but they are being severely restricted by regressive government policies.