A dose of optimism is always welcome. In recent days, the dose has been doubled. On the one hand it was the rains. As climatologists predicted, in the first week of September rainfall fell in much of the agricultural core area. The exceptions of important rains are the west of Buenos Aires and the north of Santa Fe. With the confirmation of the beginning of the Niño phenomenon, the possibility of recomposing soil profiles for sowing coarse grains and promoting the development of wheat already planted is closer.
The second chapter of the dose of optimism came from the projections of the agricultural campaign made, separately, by the Rosario Stock Exchange (BCR) and the Buenos Aires Grain Exchange. While The BCR projected a total volume of 136 million tons of grains with exports of US$34.3 billionthe Buenos Aires stock market estimated a harvest of 134 million tons that would generate foreign exchange for US$34,507 million. Both entities agreed that production volume growth will reach 70% compared to last season, hit by a historic drought. Of course, these are projections that, as is known, depend on the evolution of climatic conditions.
However, the figures once again leave a message to those who are attentive to the political and economic life of the country: agriculture is capable of recovering and generating genuine foreign exchange and development. The improvement in agricultural production for next year is equivalent to 1.9 points of GDP, as explained in the Buenos Aires Grain Exchange.
If these forecasts are confirmed, the total harvest would be similar to that of the 2020/21 and 2021/22 campaigns, although the economic contribution, compared particularly to the latter, would be lower, due to a drop in the international price of grains.
In the presentation of the Buenos Aires Grain Exchange, a fact was also highlighted that should cause concern if the scenario is observed from a broader perspective. Argentina is among the countries that grew the least in grain production in the last eight years. Since 2015/16, while Brazil grew by 120%; Russia, 71% and the world average, 28%, Argentina increased production volume by just 21%. In the neighboring country, soybeans and corn stand out, while Russia dominates the wheat market. Argentina, on the other hand, runs the risk of irrelevance. Already last season, leadership in the soybean meal market was lost, largely due to the drought, but the great producing powers, Brazil and the US, continue to grow in this product.
In the presentation, the chief economist of the Buenos Aires Grain Exchange, Ramiro Costa, recalled that the Argentine producer faces adverse policies “such as the existence of high export duties and other measures that affect – and have affected – grain trade, leaving the country at a significant disadvantage compared to its main competitors.”.
If it had not been for the reduction to zero of export duties for wheat and corn between December 2015 and September 2019, Argentina’s performance would have been worse.
This is another message for the opposition candidates in the upcoming elections who are more concerned about designing cumbersome mechanisms such as payments on account of other taxes for export duties than instead of striving for the direct elimination of a tax that, You know, it’s highly distorting. When withholdings go down there is more production.
It will be seen if the unification of the exchange rate and the elimination of export obstacles compensate for the delay in ending export duties once and for all.
In that context, The Government launched, belatedly, a new version of the soy dollar with which it attempts to bring some water to the desert of reserves of the Central Bank. It also established a reduction in withholdings to regional economies that will not have an immediate impact on production numbers, but will improve the export position of the industries. This correction is relative as long as distortions such as the exchange gap or restrictions on importing inputs persist, both due to obstacles in the exchange market and the requirements to request authorizations. The decline leaves out key sectors such as dairy or sunflower, which, due to arbitrariness, are not considered part of the “regional economies.”
