ARGENTINA: Record Harvest but Bad Signs from Asia and US

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Jan 29 1998 (IPS) - The financial crisis in Asia and the sex scandal surrounding US president, Bill Clinton, could neutralise the splendid results of the grain harvest in Argentina this year, the best so far this century.

A group of apparently unrelated factors are worrying Argentine farmers, who fear a fall in prices due to surplus offer and the financial difficulties of the buyers -basically Brazil and Asia- seeing another risk lies in the political crisis in Washington.

Agricultural analyst, Alejandro Ramirez, told IPS farmers are concerned over the possibility of Clinton standing down, as they consider his presence guarantees the flow of credit to Asia.

This is turn funds the massive cereal purchases of this region, which help keep the prices stable.

“The financial crisis is Asia is worrying not because these countries are not going to buy, but because it is unclear if they will be able to pay for what they do buy,” said Ramirez. As for Brazil, Argentina’s main client “is playing the field well,” buying in tiny amounts.

The scandal in Washington has already affected the stock exchange, and is now a factor almost as important as the climate in determining the development of prices for agricultural products.

If Clinton leaves office there could be “a change of direction” said Ramirez.

The Argentine government announced the harvest still underway will reach a historical record: 61 million tonnes including wheat, corn, soya, sunflower, sorghum, rice, oats and barley, and other grains.

This is 13 percent more than the 54 million tons of 1997, almost half again the 45 million of 1995, and double the 28 million from the beginning of the decade. Agricultural exports will bring in more than 8 billion dollars this year.

The increase was achieved despite the reduction in the area sown from 26.7 to 25.3 million hectares, which implies increased efficiency, with greater production from less space.

“The greater yields were obtained through the use of fertilisers, technology, agro-chemicals and biotechnologically improved seeds,” said Ramirez. A large quantity of high yield hybrids and pest-resistent varieties were added, while weeds were better controlled.

However, the analysts added the record yield is only certain in the wheat area, because the other grains have not yet been harvested. “The government makes estimates which can be corrected downwards in the first semester of the year,” he said.

The rains could partially complicate the oil seed harvests, like the sunflowers and soya. But Ramirez recognised climatic factors have been less influential than in other years.

Wheat producers have already started to face the first non- climate related difficulties. For the halt in demand has led to delays in shipping the grain and a lack of space in which to store the unprecedented quantity of grain.

At nearly 15 million tonnes, the amount of wheat exceeds the storage capacity and is being piled up on the ground. The government announced it would pay for the infrastructure needed to solve the problem.

Wheat exports have fallen to half the amount seen in the first weeks of January 1997. Barely three million tonnes have been sold, and Brazil, which bought 1.8 million tonnes in 1997, has only bought 900,000 tonnes so far this year.

“The Brazilian mills are in no hurry,” said another agricultural analyst, Hector Muller. “They are keeping an eye on market prices, because they know that today, the game of supply and demand is clearly inclined in favour of the buyer,” he said.

But part of the experience acquired by the farmers in recent years consists of knowing when it is worth waiting to sell. Many are now taking out loans against the cereal harvested in order to wait until prices pick up again.

The crisis in Asia is also influencing sales. Sixty percent of the world corn production is absorbed by this continent – some 40 million tonnes, and Argentina sells 40 percent of its surplus, around four million tonnes, here.

In any case, the key factor lies in Asian purchases in the United States. “If Asia buys in the US market, this serves the Argentine producers, as it increases the price of the cereal,” said Ramirez.

A piece of good news for the country, for the record harvest and the better per hectare yield, constrasts strongly with the falling prices and the crisis in Asia and Brazil, said Muller.

With one eye on the White House, those storing the grain aim to concentrate on the development of a strategy allowing them to “harvest” profits in a very slow-moving buyers market, creating a bottle-neck at the point just before export.