☀ Argentine agricultural sector importance for the world economy
Argentina is a vast country, rich in natural resources, blessed with good soil and excellent weather. Twenty per cent of GDP is agriculture related, making the agricultural sector in Argentina important for the world economy. As the land available for agricultural production around the world becomes increasingly scarce, yield will be key to maintaining food supplies in the future. And few agricultural economies can compete with the yields obtained by Argentinean farmers.
Argentina is the world’s largest exporter of sunflower oil, a leading exporter of soybean oil and among the top five exporters of soybean and corn. More than a third of Argentina’s exports are in agricultural products.
Export opportunities will be a key driver for Argentina’s agricultural production out to 2015/16, particularly for grains, rice and sugar. The new government is in the process of taking positive steps to change grain seed laws and increase the country’s biofuel blending limit, which could lead to greater production over the medium term. This could help repair its relationship with the country’s farmers and allow the country to better capitalize on its strong production potential.
The long-term soybean production forecasts should be revised if the Argentine government passes a new seed law designed to encourage farmers to use new soy seed varieties. The law, designed to increase the use of genetically modified (GM) seeds from the current 35% of farmers to more than 80%, is meant to reduce production costs while allowing farmers to keep more revenues from their output. For Argentina, one of the world’s largest soybean producers, the potential for new output could allow it to pass Brazil and become the world’s second largest soybean exporter. However, given that Brazil also intends to use GM seeds, we believe Argentina is likely to remain the world’s third largest exporter.
A continued rebound in Argentine corn and soy production is starting to play out, as the Buenos Aires Grains exchange sees a 7% increase in the area planted for the 2015/16 season, which begins with harvesting in March 2016. Although there are concerns about the effects of El Nino, which could dry out crops and lower yields, the current rains have sped up plantings.
With an excellent economic outlook ahead, now that a progressive market-friendly government has been elected, farmland prices are firming with a slight upward trend for those properties located in the Buenos Aires Province, reaching in some specific cases, the same figures as those farmlands in the most productive areas in the U.S.
The new government intends reducing farm taxes by removing the current onerous 30% retention on exports, which have damaged farm profitability. This with a host of other positive measures will make farmland highly desirable as an investment option once again.
The Gateway Team – When You are Serious About Property