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Argentine farmers favouring safe-bet soy over corn

Political and economic uncertainty hang over farmers’ heads as they plan their next crop

Reuters – Argentine farmers, anxious about an increasingly murky political outlook and economic turmoil, are turning towards soy over more expensive corn to cut costs, a shift that could impact next season’s harvest in one of the world’s top grain exporters.

Farmers said a volatile economic situation in Argentina and the likelihood of a new administration at the end of the year, after President Mauricio Macri was hammered in primary elections, meant soybeans looked a less risky bet than corn.

Corn costs around US$500 a hec­tare to produce, around 70 per cent more than soy, local consultants say, because it requires more investment in fertilizers and new seeds each season.

Dino Garimanno, a farmer in the central Argentine town of Laboulaye, said he was considering replacing his corn with a cheaper option.

“It is a little scary to bury all those dollars in the ground,” he said.

The trend could weigh on Argentina’s 2019-20 corn harvest and bolster the output of soy, analysts said. The country — now at the start of the planting season — is the world’s top exporter of processed soy and the No. 3 for corn exports, behind Brazil and the United States.

Fears over the future government’s policy direction have increased since business-friendly Macri was soundly beaten in the Aug. 11 primary by Peronist rival Alberto Fernandez, rocking markets. Fernandez is running on a ticket with populist ex-president Cristina Fernandez de Kirchner.

Fernandez de Kirchner is highly unpopular with the country’s farmers after bringing in export curbs and taxes on overseas farm sales during her 2007-15 presidency. The general election is on Oct. 27.

“The (primary) result has generated uncertainty and producers will be changing portfolios to incorporate more lower-cost crops,” Pablo Adreani, Buenos Aires-based head of AgriPac consultancy, said in an interview.

Gustavo López, director of consultancy Agritrend, estimated farmers would likely cut the area intended for corn this season by 200,000 hec­tares, to six million hectares. Soybeans would take that area to reach 17.7 million hectares.

The turmoil since the primary could also hit crop investment overall. Since the election the peso has plunged close to 20 per cent against the U.S. dollar, the country’s bonds have sunk and local equities are down sharply.

In response, the government has imposed currency controls to stem a decline in the currency and protect dwindling foreign reserves, evoking memories of more interventionist policies under Fernandez de Kirchner.

Julio Calzada, director of Information and Economic Studies at the Rosario grains exchange, said the economic and political turmoil could drag down investment by farmers, potentially affecting crop quality and yields.

“If things get complicated, fertilizing levels could be down by 15 per cent,” he said. Fertilizer is usually priced in dollars.

Farmers, for now, are pricing in uncertainty.

Juan Granero, an agricultural producer in the town of Chivilcoy, in the north of the breadbasket province of Buenos Aires, said he was “recalculating” his plans for corn.

“I don’t know if this current mess or the drought of two years ago is worse,” he added, referring to a dry spell that caused huge agricultural losses in the 2017-18 season.

“You plan a whole planting scheme, a crop rotation, but now you don’t know, you just don’t dare.”

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