AGRICULTURE-ARGENTINA: 1999 Yield to Slump Due to Markets Crisis

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Sep 17 1998 (IPS) - Argentina, one of the world’s top grain producers, will see its harvest drop next year for the first time in seven years, a result of the slump in commodity prices caused by the global markets crisis, according to private sector consultants.

Next year’s harvest will be 12 percent down from this year’s, and revenues will drop 17 percent, according to the consultancy firm Agri-Pac’s first projection of next year’s yield.

Official forecasts for next year’s harvest will not be available until January 1999. But Agri-Pac already predicts that Argentina will lose 1.4 billion dollars in lost orders.

Argentina is a member of the Group of Cairns, which bands together countries that subsidise neither agricultural production nor farm exports. Sixty percent of Argentina’s exports come from the countryside, and a contraction in demand or a fall in prices could alter the march of the economy.

Early this month the government estimated farmers’ losses caused by the slump in commodity prices in the first half of this year at around one billion dollars.

Asia, which absorbs 60 percent of all globally produced corn, has cut back its purchases since the wave of devaluations began.

Argentina supplies 10 percent of the 40 million tonnes of corn consumed by Asia. Local producers of soy flour are also concerned about the contraction of imports in Asia, where soy is used to feed livestock.

In the past few years the use of fertilisers and new technologies, investment, prices, concentration of land and large- scale production all fuelled a steady rise in Argentina’s harvests, each year’s higher than the last.

This year Argentina will enjoy an unprecedented total agricultural yield of 65.8 million tonnes. But next year’s crop should be just over 58 million, according to Agri-Pac, due to the drop in prices caused this year by sinking demand in Asia as well as in Russia, a leading importer of refined cooking oil.

Agribusiness analyst Daniel Miro predicted that next year’s harvest would be smaller than this year’s. But he pointed out that the drop would push prices up, because the trouble did not arise from overproduction but from a contraction of demand in Asia.

Since the crisis broke out in 1997 the price of wheat has crashed 30 percent, soy 38 percent and corn 22 percent. So far large farmers have withstood the fall, but crops are expected to shrink next year.

Argentina’s Chamber of Exporters predicts that exports as a whole will grow only five percent this year, rather than the 16 percent projected by the government. That slide, mainly caused by the drop in sales of commodities, is fruit of the international financial crisis.

Of next year’s total harvest, 37 million tonnes will be sold abroad, bringing in some 6.75 billion dollars – down from this year’s 8.14 billion, according to Agri-Pac.

The consultancy firm also projects that three percent less land than this year’s total of slightly more than 24 million hectares will be planted next year, which along with what is expected to be a drier climate will contribute to lower yields.

The wheat harvest will stand at around 10 million tonnes, corn at 14 million – 23 percent less than this year – and the soy crop should amount to slightly more than 17 million tonnes, three percent down from this year’s.

The only yield that should be higher next year is sunflowers, which should rise from five to seven million tonnes. Farmers used up all their sunflower seed stocks when it became clear that the price of the crop was more attractive than the price of soy.