AGRICULTURE-ARGENTINA: Small Farmers Worry About End of Boom

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Feb 22 2005 (IPS) - Eduardo Buzzi has a farm in Argentina that he would like to hand down to his son, to keep alive a family tradition that began around 400 years ago in southern Europe.

But the land that his grandfather bought when he immigrated to this South American country from Italy is no longer bringing in the comfortable profits it yielded over the last three years, and Buzzi is afraid of losing it.

"The land is something that has to be taken care of to guarantee the subsistence of the future generations," the farmer, who grows soy, wheat and corn – Argentina’s three main export crops – told IPS.

Buzzi is the head of the Argentine Agrarian Federation, which groups small and medium farmers, who have begun to worry about the future, even though Argentina, which has become one of the world’s leading exporters of soy, corn and wheat, is expected to post a record harvest this year of 72 million tons of grains.

The problem is that these numbers conceal a sad truth: the boom that Argentina’s agriculture sector has been enjoying since 2002 is coming to an end.

Like thousands of the small farmers he represents, Buzzi is afraid of "falling off the map" and being unable to keep the farm in his family. Because while international prices of grains are starting to come down, the costs of inputs are rising, monoculture farming is depleting the soil, and the burden of export taxes is heavy.

"Small farmers are less able to withstand crises, because they produce on a smaller scale, and in many cases can barely support their families," he said.

"We are very worried, and have declared a state of alert with respect to the panorama for the future," Buzzi said in an interview in the Agrarian Federation’s office in Buenos Aires.

The most serious problem facing farmers today is the drop in prices, which have fallen 30 percent in one year in the case of soy, 37 percent in the case of wheat and 29 percent for corn.

At the same time, farmers pay high export taxes, especially on soy, the "star crop", whose producers pay 56 percent of the value of their harvest in taxes.

Analysts say the plunge in prices is due to the rise in output by the main producers of agricultural commodities like soy – Argentina, Brazil and the United States – combined with a slight drop in demand in China, which is facing financing problems.

Meanwhile, the prices of inputs are climbing, increasing 48 percent over the past year for seeds for genetically modified soy, 54 percent for fertilisers, 35 percent for glyphosate (an herbicide), and 35 percent for transport.

Big producers have compensated for the shrinking profit margin by growing on an increasingly larger scale, with the total cultivated area set to expand once again this year. But both small and large producers admit that the boom appears to be passing.

The strong growth of agriculture in Argentina was triggered by the crash of the peso in early 2002, after the local currency was pegged to the dollar for over a decade.

The devaluation was one of the first decisions reached by caretaker President Eduardo Duhalde, who governed from late 2001, when Argentina suffered an economic and political collapse, until President Néstor Kirchner took office in May 2003.

The "convertibility law" or currency board that kept the peso on par with the dollar for nearly 11 years contributed to a reduction in the number of small farmers, whose numbers shrank by 103,400, while many others fell heavily into debt.

There are currently 317,000 farmers in this country of 37 million people, and 85 percent of them own small and medium rural properties, according to official figures.

Thanks to the boom experienced since 2002, many farmers were able to dig themselves out of debt and invest in tractors, pick-up trucks, harvesters and other machinery.

Out of 45,000 farmers who were in arrears to the state-owned Banco Nación, 33,000 were able to pay off their debts, and a similar phenomenon was seen with agricultural producers who owed money to private banks.

With agricultural activity growing, many rural towns revived, and full employment was once more seen in areas like Las Varillas, in the central province of Córdoba, where tractors began to be manufactured again.

The construction industry also benefited, as farmers began to invest in property in nearby cities, where their children went to study.

"What happened in the 1990s was extremely traumatic for farmers, and the reactivation was a very good thing. But many are once again starting to worry about their short-term future," said Buzzi, who warned that the same thing could occur in other sectors that are driven by the rural economy.

The Association of Argentine Tractor Factories and the Chamber of Farm Machinery Manufacturers reported that January sales were 60 percent down with respect to January 2004.

Buzzi said the slide in international prices could be offset by price supports similar to those granted in the United States, which were recommended by Argentina’s Agriculture Secretary Miguel Campos earlier this month.

Under that system, prices would be fixed in order to guarantee a minimum level of profits for the smallest farmers.

But big farmers are opposed to this kind of indirect subsidy. Large landowners, who are represented by the Rural Society and the Argentine Rural Confederations, would prefer it if the state would merely stop charging export taxes.

Buzzi, however, said the state should take a hand in the matter, and set some sort of controls on the prices charged by the companies that sell seeds, fertilisers and herbicides, to keep them from hiking prices with impunity.

"Since the only regulator of the game is the market, monoculture farming of soy, the most profitable product, is stimulated, which has negative consequences for the soil, because soy draws many minerals from the earth," said the farmer.

A scientific study presented last year in a seminar of soil experts reported that every year, Argentina’s soy harvest, estimated at 35 million tons, leads to the loss of 1.13 billion dollars worth of nutrients in the soil like phosphorus, sulphur, potassium and nitrogen.

Since fertilisers only make up for 25 percent of that loss, the depletion of the soil will be felt in the medium term, the report warned.

"The soil is being exhausted, and our future will be mortgaged in just two decades," said Buzzi.