Argentina Agribusiness Report Q4 2013 - New Study Released

From: Fast Market Research, Inc.
Published: Thu Oct 24 2013

With an election on the horizon and given continued problems with the economy, the Argentine grain sector will play centre stage over the medium term. With foreign reserves dwindling, grain exports (particularly soybean) will remain vital. Soybean will remain the pre-eminent crop in Argentina over the long term, and we expect the poultry production to show the most promise within the livestock complex.

Like the rest of Latin America, we believe growth in meat consumption will slow, as levels are already close to developed market standards. We are forecasting only minimal growth in sugar production over the long term, as we are forecasting lower average sugar prices in the coming years and the industry faces several issues, mainly low prices and export controls. One regional government (Tucuman) is attempting to establish a provincial marketing board, although some have questioned the move in the context of poor financial positions of many of the mills.

Full Report Details at

Key Trends

* Corn production growth to 2016/17: 11% to 27.9mn tonnes. Our revised growth projections stem from lower average corn prices in coming years along with more substitution to soybean plantings.
* Soybean production growth to 2016/17: 12% to 56.2mn tonnes. Growth will come from increasing export demand for soybeans along with more value-added products such as soybean oil. Soybean crops are also generally less capital intensive than corn crops due to lower input costs.
* Beef production growth to 2016/17: 18% to 3.3mn tonnes. Despite the growth, beef production will fail to exceed levels seen in the mid-2000s.
* 2013 real GDP growth: 3.7% year-on-year (y-o-y) (down from 4.0% in 2012; predicted to average 4.2% from 2013 until 2017).
* Consumer price index (end of period): 22% y-o-y in 2013 (down from 25% in 2012).

Industry Developments

We are forecasting Argentina sugar production growth of roughly 4.7% to 2.3mn tonnes in 2013/14. This comes as weather during the harvest season has been favourable. Despite the larger production, the sector faces concerns over falling prices, in line with a steady decline in global prices. The sector has also invested little in ethanol production despite a 5% ethanol mandate from the government. Indeed, owing to high sugar prices when the ethanol policy was first created, resources were diverted to sugar. Consequently, even though the government is interested in expanding the country's ethanol quota, production is likely to only show a minor increase over the medium term. Export problems are also hurting farmers, as the combination of sugar export restrictions combined with poor logistics and commercial opportunities means that exports are often uncompetitive.

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