Argentina’s non-subsidized soybean and corn sectors are widely acknowledged as being one of the most efficient in the world. While a competitive exchange rate against the dollar helps it conquer export markets, this is only a small part of the story.
The dominance of no-till farming in Argentina is a key factor in making the country’s oilseed and grain sectors so super-efficient. With less labor, diesel and equipment required under a no-till system, Argentine farmers are able to achieve a big cost advantage over their U.S. counterparts.
For the most part, all planting, spraying and harvesting of Argentine crops is contracted out to specialized firms. “Contracting firms can achieve huge efficiencies in the use of machinery and pass on the benefits to farmers,” says Andrés Méndez, Coordinator of Precision Ag at the federal agricultural technology agency, INTA.
Typically in a year a contractor could sow up to 12,356 acres, cover 74,131 acres with a self-propelled spray and harvest 9,554 acres.
“Contractors also procure the seeds, fertilizers and agrochemicals, enabling them to negotiate volume discounts with suppliers, making it cheaper for farmers,” according to Osvaldo Barsky, professor of Agricultural Studies at the University of Belgrano.
“The high quality of human resources is another fundamental factor driving efficiency,” says Willy Villagra, director of Openagro. Many of the larger farmers have agronomy degrees, and those who don’t procure the know-how from specialists.
But Argentine farmers are not resting on their laurels. They increasingly turn to precision-ag tools such as remote sensing, yield monitors and guidance systems for even greater efficiencies.
“It’s growing at a much faster pace that we expected,” says Méndez. “More than 2,000 farmers attended our annual precision-ag course this year in Córdoba. With the big rise in demand for these technologies, many Argentine companies now produce equipment to serve the market, whereas before it was imported.”
For the U.S. corn and soybean farmers setting their sights on export markets, there are signs that Argentine exports may be losing their competitive edge, despite the best efforts of its farmers, making it easier in the medium term for the U.S. to gain market share.
Ernesto Crinigan, president of the Buenos Aires Cereals exchange, recently highlighted the need to improve energy production and transport to stop the erosion of competitiveness for corn and soybean producers. “Argentina's production has more than tripled since the early 1990s, but electricity generation and basic road and transportation infrastructure hasn’t kept pace.”
Inflation at around 26% poses a big threat, too. “Input prices for agrochemicals, seeds and fertilizers have all increased in dollar terms,” says José Garrahan, a producer in Carmen de Areco, Buenos Aires province. But the big problem is labor costs, which have skyrocketed over the past year.
Competitiveness is also eroded by government bureaucracy. It’s estimated that the costs resulting from regulations and procedures associated with exporting grains and oilseeds has increased by a whopping 163% over the last six years.
This is part of a series on agriculture in Argentina by John Kennedy, a writer and economic consultant. You can contact him at email@example.com.