Argentina can increase agricultural exports if trade policy changes

Buenos Aires, 24 Mar Argentina, one of the largest agricultural producers and exporters in the world, can expand its turnover to compensate for the lack of stocks of wheat, corn and soy and sunflower products due to the war in Ukraine, although it depends on trade policy decisions of the Alberto Government Fernández, as well as the effect of drought and the increase in the cost of fertilizers. “The possibilities of increasing the production of agricultural goods exist, but they depend, in addition to climatic and economic factors, on incentives that are defined at the political level. In this sense, there are scenarios of some uncertainty in the face of recurrent changes in the rules of the game,” Guido D'Angelo, economist at the Rosario Stock Exchange (BCR), told Efe Guido D'Angelo. Argentina, in order to decouple domestic prices - with inflation of 52.3% year-on-year - from the rise in external prices and increase tax revenues, establishes export records and export duties for agricultural products. FOOD INSECURITY Markets that supply Russian and Ukrainian wheat — one-third of global cereal trade — are looking for alternative sources and Argentina is the seventh largest supplier of wheat in the world. But the Argentine contribution of wheat to the world in the short term “is very scarce” because the Government established a volume of 14.5 million tons of foreign sales for the 2021/22 campaign and some 13.9 million tons have already been marketed - of which the main market is Brazil - so that outstanding wheat sales are about 600 thousand tons, according to BCR, that could rise to 900 thousand tons if registers were reopened. It is the product of a record harvest for 2021/22 of 22.1 million tons of wheat. The long-term contribution begins in December of this year, with wheat from the 2022/23 campaign that is not yet sown, and although the Argentine government expects another record harvest of 25 million tons, for now it has approved the registration of 10 million tons of exports. UNCERTAINTY In the placement of maize, Russia and Ukraine account for 20% of the world's supply and Argentina, as the world's third largest exporter, has room to offer more of its production, but it is also conditioned by the maximum foreign sales established by the Ministry of Agriculture. The volume of maize stipulated by the State is 25 million tons of maize and foreign sales of 22.8 million tons have been recorded, so Argentina could contribute nearly 2 million tons to the world in the short term, according to BCR. BCR estimates that they could rise to 8 million if external sales were opened to a total of 33 million tons of maize: “Argentina could only contribute them if the Ministry of Agriculture opens the registry, but it is not something that can be expected,” explained D'Angelo. The opportunity comes within the framework of a corn harvest that began this month of 47.7 million tons. SUBSTITUTE While the Black Sea area is not a major producer of soybeans, Argentina can increase sales of soybean oil - of which it is the world's leading exporter and has just raised export duties to 33% - as an imperfect substitute for sunflower oil, 80% of which arises from Ukraine and Russia. The rise in the price of sunflower oil underpins the prices of soybeans - of which Argentina is the third largest exporter in the world and expects to harvest 40 million tons - and its derivatives, generating higher foreign exchange earnings for the South American country. Argentina also opens up an opportunity for 2023 in the production of sunflower oil, of which it is the fourth largest exporter in the world with 0.8 million tons and has the capacity to continue growing, according to BCR. COSTS AND DROUGHT “An increase in the prices of the products that Argentina exports results in higher dollar revenues to the country,” said D'Angelo, but at the same time it suffers “a very high increase in inputs, such as fertilizers, and from a very strong drought, which has reduced the production of coarse grains, and this year it faces a climate perspective complex”. The external cost impact comes from the fact that two-thirds of the fertilizers that Argentina consumes are imported, according to BCR, while wheat and corn account for about 70% of the demand for fertilizers in the South American country. Drought is another challenge that Argentina faces. Since the phenomenon of “La Niña”, which has already generated less rainfall in the last two years, may become a negative factor on agricultural production in 2022.