April 29, 2004

 

 

Argentina's Future Rides On China Soy Imports
 

Argentine ranchers are aware of the consequences that dependence on one export can bring. As they are currently dependent on beef exports, they are worried that the same situation may happen with soy. This worry remains despite top harvests, and courting China as a buyer.

 

Last year, soy exports topped six billion dollars for Argentina -- almost a quarter of the sales received by nation.

 

Argentina is the number-three soy grower, after Brazil and the United States.

 

Prices are at their highest in 15 years. However, planners have misgivings because such prosperity rides on prices at the Chicago Board of Trade.

 

The government collects 13 percent of its tax revenues through the agricultural sector, mainly from soy. In order to meet commitments to Argentina's myriad creditors, export taxes were crucial for President Nestor Kirchner, said economist Carlos Melconian, one of the first to sound the alarm over "soy dependency."

 

In fact for two years, a 23.5 percent export tax on the "green gold" has generated all the budget surplus pledged to the International Monetary Fund to repay the nation's foreign debt.

 

Moreover, land planted in soy has more than doubled, from six million hectares to 14.3 million since the 1995-1996 crop. Production hit 35.5 million tons last year.

 

Despite a drought, production for this year will be 33 million tons.

 

Soy, in fact, has all the makings of a profitable crop. It is easily grown under fickle weather, unlike corn and cotton.

 

Its tolerance of shallow soil prompted a boom in drought-ridden northern Argentina.

 

Growing the crop costs 100 dollars a hectare, while corn costs 700 dollars, said Jorge Ingaramo, head of economic studies at the Buenos Aires cereals exchange.

 

China's 1.3 billion people consume much of the world's soy, assuring its future in the market.

 

Grubocopatel said Brazil, Argentina and Paraguay are the only countries with room to expand soy production.

 

Opposition lawmaker Elisa Carrio worries soy production may cost Argentina dearly in the future.

 

"I am afraid that in 10 years, we will find ourselves with depleted soils and low profitability," the ex-presidential candidate said.

 

The risks of falling back on a sole crop should not be neglected either.

 

Soy, which brings more than 350 dollars a ton, has displaced cotton and milk production. Argentina had imported both last year.

 

In impoverished Chaco to the north, soy has overrun 70 percent of land that once grew cotton. That has its social drawbacks, because cotton farming employs unskilled labor, while soy needs modern technology.

 

According to Ingaramo, soy could take over another 2.5 million hectares -- a million borrowed from cattle farming, another million from hill country and half a million from other crops.

 

Soy would thus cover two-thirds of Argentina's arable land.