Agriculture in Argentina: Is the era of leases base on yield over ?
Agriculture in Argentina
The article is dedicated to both tenants and owners. I intend to give another insight into the future of the current production model and show the need to reconsider agriculture in rented farms.
Today the biggest problem is confronted by the system of agricultural producers under hire, mainly due to the low profitability of the same, today aggravated by the low prices (very low in wheat, low in maize and sorghum and relatively normal in soybeans) and the Excess rainfall.
If we analyze the gross margins of the typical rotations of the zone, we will see that for three campaigns the yield of equilibrium of soybean and maize (or the sum of direct costs expressed in quintals (quintals=weight measure equal to 46 kilos ) which is equal to the average yield of these zones.
Conclusion: In rented fields, there are only positive margins when there are yields above the historical average. In terms of probabilities, approximately three out of four years will have zero or negative economic results.
While this is a generality to be studied for each case, the analysis of gross margins is only one of the aspects to consider within a deeper problem, where the tenant producer is forced to finance the safe rent of the owners,, at the expense of great risks or concrete losses of its capital. A sign of this is in areas of lower productive capacity, where they have liberated many fields that were historically highly coveted for rent.
The calculations indicate that at the beginning of this campaign, the yield of soybean indifference, (considering the rental cost of 10 to 12QQ/ha) for the San Francisco area, was between 29 and 31 QQ/ha. (has not changed sensibly so far). The integrated Agricultural Information System of the Ministry of Agriculture, Livestock and Fisheries (SIIA) shows that the average soybean yield of the last ten years for the San Justo Department is 24 QQ/ha. Another unfortunate consequence of these numbers is that some producers did not inoculate the soy!
If we analyze the case of maize, before sowing the direct cost represented about 55-60 QQ/ha ( 1 and today, with current prices, went to 70-80 QQ/ha depending on the level of fertilization. If we add about 12 qq/ha of soybean of $200/qq as a rental cost for the six months of cultivation, making maize in a rented field under these conditions has a yield of indifference between 90 to 97 QQ/ha. According to the SIIA, the average departmental performance of the last 10 years is 64 QQ/ha. !! In particular, significant amounts of money will be lost if the yields are normal.
In this context, it is logical to quedisminuyeran the sowing surfaces of maize and sorghum and to suspend much of the fertilization (by reduction of surfaces or by reducing expenses), with the consequent negative balance of nutrients. It is then confirmed that subsistence agriculture ends up being a mining for soils, or it would be relevant the phrase “bread for today, hunger for Tomorrow”.
Another general consequence of this low profitability presses for some producers, in order to reduce their costs, are using lower doses of agrichemicals. We all know that sub-doses in herbicides, insecticides and fungicides encourage greater overall resistance or leave unbridled weeds and pests difficult to control.
Another observable phenomenon is the lower contracting of coverage against hail, which gives the system greater instability and risk yet. or the low intention of sowing the wheat despite the saturated profiles of water, which is usually it’s the main limits in the potential of yield.
Speculation on possible scenarios we must add that the situation can be aggravated by the hand of hard-to-control weeds. The chemical control will make costs more expensive and imply a defensive technical approach with dates of Ytécnicas sowings that lower the productive potential of the crops. In short, more costs and less yields is the panorama.
Undoubtedly nobody knows exactly what will happen from October, but if we assume that the national government (current or future) won’t lower the fiscal pressure or the withholding (perhaps something in maize and wheat but not in soya) and if we accept that we cannot speculate
On the evolution of the exchange rate, but to keep the input-steel products relationships stable, the most likely scenario is that beyond the 300 km around Rosario (profitability zone a little more acceptable perfecto freight) The panorama already described. It will change substantially. That is why there will necessarily be a readjustment in the productive structure since the tenant producer could no longer cope with the lack of profitability because he has no back to hold much more.
In view of this situation, what I am most interested in personally is the possible adjustment that the agricultural production system should give, changing its current paradigms, especially on the landowners ‘ side.
The readjustment could be: a) of the rental values (which, in my opinion, does not solve the underlying problem). 2) of the owners returning to the status of producers, as an attempt to maintain their historical income or to the termination of contracts by the tenants (I estimate that only some will because most do not have neither desire nor knowledge). 3) move from the current fixed rental system to another, to a percentage of the production (or share). I imagine it as the best current alternative and where the income of both involved will be linked to the productive and economic outcome.
Several models are being tested in different parts of the country, but in our area one could think of a mixed model, with a fixed base up to a certain level of yield of the crops, and another variable, a percentage of what produced from that yield upward, suitable for the productive capacity of each field and its weed status. Sorry to insist, but I argue that only negotiate a decline of a couple of quintals to the value of rent does not solve this problem.
The landlord must understand that he cannot sustain historical income levels without making changes, but above all, he must be involved in this new paradigm that demands that he feel his tenant as a strategic partner and that he genuinely engages and commits to this problem.
Technical advisers should also visualize this change to intervene favourably in strengthening these linkages, as it is not enough to provide input-based technologies only.
In our consultancy, to respond to these difficulties, we have developed a new service that we call GIA (Integral Leasing Management), covering the demand from all possible professional angles (legal, technical, accounting, etc.).
“Today the business world must move fast, fast and adapt. The challenge is now, And being mounted on the non-durable rocket is the danger with which we have to have more attention. Change is the only thing that doesn’t change. ” Vicente Corona Heredia.
(by Eng. Agr. Javier García).
Consultant Network of Agricultural professional services. www.seproanet.com
3564-570100 Teacher degree in Rural Administration-UTN San Francisco.
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