May 18, 2004

Booming Soybean Market Seen In Argentina

Two years after hitting rock bottom, Argentina's economy is on the rebound. Although the 10-month-old government led by President Nestor Kirchner has taken credit, economists are praising the soybean - a small, round legume packed with protein that is at the margin of Argentina's beef-heavy cuisine, but at the heart of its economy.

Soybean prices have soared to their highest levels since 1988, bringing in billions of dollars in foreign currency and powering the economy's 8.7 percent growth last year.

Taxes on soybean exports, meanwhile, have been a godsend for the cash-strapped government, providing a huge chunk of its budget surplus.

In recent years, soybeans have swept across Argentina's vast plains, replacing other crops and cattle to become the nation's top export.

But a growing chorus of economists, agronomists and environmentalists is warning of the dangers of the soybean bonanza, which is occurring to a similar degree in neighboring Brazil, Paraguay and Uruguay.

Never before has Argentina's agricultural production been so concentrated in one crop, a tendency observers say is favorable only as long as soybean prices remain high.

From sugar cane to coffee, monoculture economies historically have spelled ruin in Latin America, as boom inexorably has been followed by bust.

In addition, Argentina in recent years has become increasingly dependent on imports of other agricultural products, from milk to potatoes. Agronomists, meanwhile, caution that the expansion of soybeans is leading to deforestation and causing soil depletion as many farmers neglect to rotate the legume with other crops.

Argentina is the world's third-largest soybean producer behind the United States and Brazil. Most of the soybeans are exported to China and other Asian countries, where they are crushed into a meal used as feed for livestock.