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A snapshot of Argentine farming sectors changes

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Where agribusiness goes in Argentina, so does the country. The latest National Survey of Agricultural Producers (ENPA), was conducted the Agribusiness Centre of the Universidad Austral, in partnership with the Centre for Agribusiness at Purdue University (USA), reflects how the farming activity is changing in the view of many producers.  A new model, more capital intensive per hectare, exists now in order to grow products more integrated into the chain individually or associatively with other producers. They are leaving behind the old model to the rise of the “mega-producer” using leased land for financial leverage.

There will be more growth in crops other than soybeans, such as wheat and corn, and the production of beef, pork and milk production. Plus increased nut plantations, olives and vineyards. Previously an export tax on all grains encouraged growers to focus on Soy.

All these projections were made at the World Conference on Management and Agribusiness Management Association International Food and Agribusiness (IFAMA), held this week in Buenos Aires. IFAMA is an NGO, focused on agribusiness which has, among its main partners, 25 universities from five continents, including the Austral University.

The survey covered 818 producers in the core of the humid pampas in Buenos Aires, Cordoba, Santa Fe and Entre Rios regions. The area represents 87% of soybean production (around 50 million tonnes average harvests 2012/13 2015/2016).

A key feature of the survey was that for the next five years, seven out of ten producers plan new substantial investments. While five-year option horizontal expansion, autonomous (more hectares/more production without external partners) represents 64.7% and the horizontal associated (with external partners) 29.4%, becomes important in order to grow vertically. The survey reflects that 25.9% provide project growth vertically associated (with external partners) and another 38.4% which provides for independent vertical expansion (individually).

“We do not think only in the traditional agricultural business, but we need to be more competitive.  Producers see in their areas cases where they can become more competitive and earn more money,” said Bernardo Piazzardi, professor also at the Austral University.

Associated vertical growth, eg “mega-producers” (those farming over 10,000 hectares), go from being 14% in the next 12 months to 54% within five years. In addition, when the segments are analysed, an important fact is that within five-years 14% of producers said that investment in bioenergy will increase to 27%. According to the professors of the university, this scenario also means a challenge for some banks to set credit in line with these new investments. “There are banks putting together a new business plan based on this,” Feeney said.

In the 2009 survey, 80% of farmers rented at least a portion of the total cultivated land they farmed on. In 2012 that percentage dropped to 72% and for the last survey, 61%. This means that the producer does not want to take so many risks on the business side of farming.

One result of the survey is that “soy is the only activity without expectation of growth in the next five years.” Meanwhile, other traditional crops prospects are rising strongly. In addition, the segments showing higher growth expectations are animal protein and speciality crops.

“Greater diversification of the productive matrix would go in terms of grain and a greater tendency to aggregate value through animal protein,” says the job.

In soybean, for segment medium producers, (300-600 hectares), has an expectation of 0% growth in soybean, but 57.1% in maize / sorghum, 28.7% wheat / barley, 25% milk, 32.1% in beef, 100% in pig production, 69.4% in specialty crops and 55.8% pasture / rangeland.  Looking at the other end of a segment, large producers, (more than 1800 hectares), a fall of 17.3% for growth in soybean is observed, but there is an increase of 34.9% in maize/sorghum, 18.3% wheat/barley, 45.2% in beef and 31.7% in pork. Moreover, in the case of mega producers, 525% growth in pig production in beef 60.7% and 100% in milk is observed.

“In Argentina, producers want to be not only producers but entrepreneurs.  They also look to invest in other business,” said Robert Feeney, a professor at the Universidad Austral.

“By segment size, activities with greater growth projected to five years are for medium farmers, ie pig farming to commercial producers (600 to 1800 hectares), pasture and cattle for meat production; for large producers higher growth activity will be in special crops, while for mega producers, the fastest growing activities stand out as pig farming, cattle (dairy and beef) and pasture farming.”

Then he adds: “It is noted that the two segments of smaller producers survey, medium and trade are planning the biggest growth ie. 26%; against growth for all activities of 8% for large producers and 14.5 % for mega producers”.

Strong growth prospects is a very good sign,  however, there are also issues that need to be addressed. “We have some funding challenges still,” warned Alejandro Reca, Dairy San Ignacio, who attended the Congress of IFAMA. He was referring not only to the costs but financial structures.

They have a risk-taking profile

Argentine producers have other features that can be observed. For example, half make decisions with their family. In addition, producers have a strong identification with strong brands, such as farm machinery. Seeds, for example, 33% said it would continue buying the same brand even when the price rose more than 10 per cent. The Argentine producer is seen as efficient in making separate options within his businesses and this is also another feature of their profile.

Generation X- Young farmers

Young men

In Argentina, the average age of farmers stands at 46 yrs. This is much younger than in the United States, where the average is ten years older at 56 yrs. In England, the average is 70 years.

Education

About 61% of farmers surveyed have at least one college degree, while 7% a graduate degree. Only 5.5% of respondents producers have not completed high school.

Where do the farmers reside?

Two-thirds of the small producers live on the farm or within 50 kilometres of it. This proportion rises to 74% in the medium-sized ones and to a low of 36.7% of the larger ones and 8.3% in mega-sized farmers (5000 ha plus).

Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, providing expert advice on property acquisition and investment tours.

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Geoffrey McRae

About Geoffrey McRae

Geoffrey McRae is the founder of GTSA - Marketing. He is a New Zealander with a strong Agro-business and Real Estate background spanning over 30 years both in his own country and South America. I hope you enjoy reading our news site. Please share it on your social media below.

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