Argentine Agricultural Sector Impact of new policies and ... · Argentine Agricultural Sector...

Argentine Agricultural Sector

Impact of new policies and trade tensions

Ramiro CostaDeputy Executive Director

Buenos Aires Grains Exchange, Argentina

AGRICULTURAL LONG-TERM OUTLOOK FOR ARGENTINA (ERAMA 2027/28)

WHAT TO EXPECT FOR 2018/19 AND 2019/20 CROP SEASONS?

RECENT CHANGES IN AGRICULTURAL POLICIES

ECONOMIC CONTEXT AND INCENTIVES

11º world supplier

3% of agro-industrial exports

ARGENTINA

USD 36.7 billion

60% of total exports

AGRICULTURAL EXPORTS OF ARGENTINA

!Soybean complex accounts for

almost 50% of Argentine agricultural exports.

Main products (AVG 2015-17)

26%

9%

Corn 10%

Wheat 5%

Shrimpsand prawns 3%

Wine2%

Bovine meat 2%

Peanuts 1%

High inflation, Overvalued Exchange rate Increase in export duties Quantitative restrictions Limitations on the foreign exchange market

MACROECONOMIC INSTABILITY

2007-2015

Government intervention in wheat domestic price setting.

Export quotas Export duties

1980’s

HIGHLY REGULATED AGRICULTURAL SECTOR

Elimination of export quotas and export duties

DEREGULATION

1990’s

2000’s

2002 Economic crisis Depreciated exchange rate Reintroduction of export duties

CRISIS

2016

AGRICULTURAL POLICIES IN ARGENTINA

Removal of currency controls Elimination of export restrictions Elimination and/or decrease of

export taxes

NEW ADMINISTRATION

IMPACT OF POLICY MEASURES

5%

2%

1%

3%

1993-1999 2000-2006 2007-2015 2016-2017

Evolution of Area Growth-Rate (%) in Argentina

Economic institutions shape economic incentives: the incentives to become educated, to save and invest, to innovate and adopt new technologies, and so on.

― Daron Acemoglu, Why Nations Fail:

The Origins of Power, Prosperity, and Poverty

“


!Argentinean farmers: early adopters of new

technologies whenthey face positive economic

incentives 11 13 21 9 10

42 50

50 57 54

47 37 29 34 36

10/11 12/13 14/15 16/17 17/18

Low TL Medium TL High TL

Great increase in fertilizer application and no-till farming since 16/17.

Level of technology adoption in ArgentinaApplied Agricultural Technology Survey

2018

New export duties

RECENT CHANGES IN POLICIES

2019

MAIN TWO FACTORS OF

UNCERTAINTY

RECENT CHANGES IN POLICIES

Changes in local policies

&

Trade tensions

NEW MEASURES APPLIED IN ARGENTINA

% Change in Export Duties

+ 2

+ 5

+ 5

+ 10

+ 10

26

23

23

0

0

28

28

28

10

10

Soybean

Soybean Meal

Soybean Oil

Wheat

Corn

p.p.

CROP SEASON 2018/19

Production Estimates(Million Tons)

53

45

19

3,9

+2

-0,7

Hydric Balance

EFFECTS OF TRADE TENSIONS ON SOYBEAN

Soybean FOB Prices (usd/tn)

58 6371

82 8396 88

0

20

40

60

80

100

120

2012 2013 2014 2015 2016 2017 2018

China soybean imports(millions tns) - 8%

0.3 0.3 0.6 0.7 0.7

2.22.9

0.8

0.0 0.0 0.0 0.0 0.0 0.0

0.9

1.9

6.4

0

1

2

3

4

5

6

7

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Argentina soybean imports (million tns)

6.4

EFFECTS OF TRADE TENSIONS ON SOYBEAN

Monthly Crushing (Million tons)

1

2

2

3

3

4

4

5

5

Jan Feb Mar Apr May Jun Jul Ago Sep Oct Nov Dec

range 2017 2018 Average Last 5 periods

!Trade tensions have boosted demand for Argentine

soybeans at the expense of byproducts.

Baseline• US-China trade

tensions• New export

duties

Agreement• End of trade

tensions• Only new

export duties

Previous Duties• US-China trade

tensions continue

• Previous export duties

Regular• End of trade

tensions• Previous

export duties

SHORT-TERM ESTIMATES: SIMULATED SCENARIOS

In order to analyze the impact on argentine crushing and exports, 4 different SCENARIOS were defined:

1 2 3 4

SHORT-TERM ESTIMATES: SOYBEAN RESULTS 2018-2019

Source: Elaborated by the Buenos Aires Grain Exchange in collaboration with the INAI Foundation

38 39 41 43

15 11 10

7

Baseline Agreement Previous Duties Regular

Crushing ExportsSoybean (Million tons)

1 2 3 4

SHORT-TERM ESTIMATES: CROP SEASON 2019-2020

Planted Area 2019-2020: 4 main crops (Million Ha)

31.6

32.3

33.3

30.5

31

31.5

32

32.5

33

33.5

2018-19 2019-20 2019-20 Regular

5,4%

2,2%

!Planted area could be 1

million hectares below the potential.

Cereals will grow at a lower rate than soybeans.

4

ERAMA 2027/2028WORLD AND

ARGENTINE AGRO-INDUSTRY

REFERENCE SCENARIO 2027/2028

LONG-TERM PROJECTIONS: CLOSING POTENTIAL GAPS

Closing gaps among farmers and logistic

improvements

Scenario 3

Scenario 1

Closing yield gaps among

farmers

Efficiency improvements

in logistics

Scenario 2

+4%+12% +16%

Production (Million Tons)

Baseline Scenario 1Logistics

Scenario 2 ReTAA

Scenario 3 ReTAA + Log

FINAL REMARKS

Opportunities Challenges

Source: Estimates Department, Bs As Grain Exchange and INAI Foundation.http://www.bolsadecereales.com/

OUR WORK

Thank you Ramiro Costa

[email protected]

http://www.bolsadecereales.com/Buenos Aires Grains Exchange,

Argentina


Producer Support Estimate (PSE) % of Gross Farm Receipts (GFR)

3%

13%

9%

21%

5%

12% 17

%

0%

-31%

2%

10%

10%

21%

4%

16%

15%

-8%

-12%

A U T R A L I A C A N A D A U . S . A . E . U . B R A Z I L C H I N A R U S S I A U K R A I N E A R G E N T I N A

2007-15 2016

!Argentine farmers received negative

support by government policies.

282.2106.3

42.437.1

31.6

21.1

PRODUCT SUPPORT ESTIMATE (PSE)

EU28 Japan USAChina

48%

Indonesia Korea

6% 4%7% 5%18%

Source: IADB-Agrimonitor and OECD.

Main Supporter CountriesAVG 2013-15 Billion USD

% of Gross Farm Receipts (GFR)

Argentine Agricultural Sector Impact of new policies and ... · Argentine Agricultural Sector...

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