Santiago Lorenzatti looks young enough to be a recent college graduate working at his first real job. Out here on the Argentine Pampas, though, a young man can punch through age barriers and push limits.
Lorenzatti doesn’t want to talk about how old he is or his educational background—he has an agribusiness degree from the University of Buenos Aires—or family or how he landed the job, because that’s all trifling stuff to him. He wants to talk business, and business, to him, is farming. At Grupo Romagnoli, where he works as general manager in an ultra-modern farm office in the quiet countryside of Cordoba Province, business is soybeans and more soybeans, with a little corn and wheat along with some cattle thrown into the mix.
He oversees 15,000 hectares at the moment. That’s about 37,000 acres. Grupo Romagnoli, with Jorge Romagnoli as president, is in expansion mode, so acreage will soon boom even higher. What’s unusual is how the company has chosen to grow.
Just outside the office, it looks a lot like central Illinois: flat, big fields, few trees, fewer people. The eastern portion of Cordoba Province, where we are, is the heart of Argentina’s soybean production region. Like the U.S. Corn Belt and Ukraine, soils in this Pampas area rank as some of the world’s best.
U.S. farmers would find things quite a bit different here, however. For one thing, the soybean is king in Argentina. Soybean acreage outnumbers corn by a margin approaching 5:1.
Even U.S. farmers who distrust some government agencies like the EPA would be astounded by the Argentine government’s interference with agriculture and high levels of taxation with resulting disincentives to invest in farming. In addition, shockingly high inflation rates currently running about 25% annually make the Argentine peso an object of derision in world currency markets.
With a finger in everything agricultural, the Argentine government stifles the business by intervening in exports markets, particularly for corn, farmers here say. The typical Argentine farmer pays 68% of his income in taxes, says Jorge Romagnoli. The government taxes soybean exports at 35%, corn at 20% and wheat at 23%. Despite that, the nation’s soybean acreage continues to increase and so do exports.
Argentina accounted for 24% of the world’s soybean exports in 2012. About 70% of the nation’s soybeans are crushed, and in 2012 Argentina owned 45.5% of the world’s soybean meal exports. Compare that to Brazil’s 21.5% and the U.S.’s 16.3%.
Speaking through an interpreter, Lorenzatti says that after selling a grain elevator, the company used the money to buy land in marginal production areas in both the northern and southern part of Argentina. With the Cordoba headquarters roughly in the middle, it is 1,200 miles from the northernmost farm to the one in the south.
“We went outside the Pampas because we see an opportunity to increase those land values. Here in Cordoba, land is valuable but it’s rare to have a significant increase in land values. Land rents here are very high,” he says.
“In Chaco, the northern portion, we’re putting in a mixed production system based on soybeans, wheat, corn, sunflowers, grain sorghum and cattle. In the native forest, we cannot do anything, so we are exploring the environmental services market as a contribution to biodiversity.”
Far to the south, almost in remote Patagonia, the company is expanding into Rio Negro Province, which is totally different from the subtropical northern region.
“It is very dry, almost desert, similar to western Kansas. The only way to grow crops there is with irrigation. The water comes from the river, which is fed by snowmelt. We’re trying a new type of irrigation system for us, center pivots plus subsurface drip. We are testing both. Those two systems are more efficient than traditional furrow irrigation,” Lorenzatti says.
“Right now we’re in a phase where we’re evaluating the systems. If we’re successful, we will capture value by developing irrigation in the region. By doing that, real estate values will increase.”
In the Rio Negro, infrastructure is a big issue. Electricity is not available in some areas. There are some paved roads but not a lot of them. Farmers there tend to be cattle producers.
“The main limitation is that it hasn’t developed because it is desert. We’ll grow cover crops to improve soil structure and organic matter. This past season we had grain sorghum and corn there. That’s the first time these fields grew cash crops,” he says.
“This year we’ll be testing soybean varieties from maturity groups II to IV. The latitude is comparable to northern Iowa.”
For Lorenzatti, expanding to Argentina’s edges made sense economically.
“Margins in the Pampas were starting to get smaller, so we decided to go outside the area. In the short-term, we have big complications in our agriculture due to government policies. However, in the mid-term and long-term, the global scenario for food production is extremely favorable. We’re hoping that the current situation will change and go more toward a favorable situation for the farm sector.”
Grupo Romagnoli produces seed in addition to growing and selling grain, and invests in biotech through Bioceres, an Argentine research co-op owned by a group of farmers.