August 11, 2011

 

Argentina's corn yield seen to surge, boosting soy

 

 

Argentina's corn production will grow strongly over the next five years, also supporting a boom in soy cultivation, a Monsanto official said.

 

The South American country-a top provider of soy, meal and oil-needs to expand crop rotation as part of its drive to meet soaring world food demand, said Pablo Ogallar, Monsanto's strategy director for southern Latin America.

 

He expects five million hectares in Argentina to be planted with corn this season, up 25% from the previous year, according to Monsanto's estimates. He expects soy area to fall slightly to 18 million hectares.

 

"Our projection is that corn area will keep growing for four or five years and that soy area will be stable," the Monsanto official said this week.

 

"The crop that is, and will continue to be, most important to Argentina is soy. But you have to take care of it, and the way to do that is by planting more corn and wheat," he added.

 

Argentina grows five times as much soy as it did 20 years ago, helping to fuel one of the fastest-growing economies in the Americas.

 

Lured by the promise of high returns fueled by growing food demand, international investment funds have been pouring money into the farm sector in Brazil and Argentina, where land is still available to be developed for agriculture.

 

Argentina, with its ample water supplies and fertile Pampas, remains interesting to investors despite the feud that has existed for years between farmers and President Cristina Fernandez. They accuse her government of trampling profits with interventionist policies such as wheat and corn export quotas.

 

The quota system is designed to tamp down inflation by keeping local food supplies steady. Growers say it discourages them from planting wheat and corn, even though both are needed to rotate crops and ensure continued strong soy production.

 

Ogallar, who declined to talk about the government's policies, said soy fields planted after corn are 16% more productive than those seeded with soy year after year.

 

Corn has gained popularity as an alternative crop in Argentina because it is easier to sell domestically than wheat. Corn has more local buyers, Ogallar explained, which increases competition and drives prices higher.

 

"We have good international prices and a high level of technology in Argentina, the question is how to design crop rotation," Ogallar said. "The ratio of corn and wheat to soy would improve, and ultimately benefit soy production, if we had more transparency in the marketplace."

 

"But even under current conditions the trend is clear," he added, "corn production is going up and will continue to go up over the next several years."

 

The world's biggest seed company, US-based Monsanto sells genetically modified corn technology in Argentina and is asking farmers to sign up to use its new soy seeds.

 

South America and China figure prominently in the company's quest for growth.

 

Fernandez is meanwhile expected to win re-election later this year, even though she remains unpopular in rural areas.

 

She vows to "deepen the model" of her government if she wins another four-year term, leaving growers fearing more interventionist policies such as export curbs.

 

Argentina is the world's top supplier of soyoil and soymeal as well as its No.3 provider of soy. The country is also the No.2 corn exporter after the US.

 

"But we are facing a problem in terms of sustainability because 18 or 19 million hectares of soy and only five million of corn and even less than that of wheat does not make sense," Ogallar said. "It would be ideal to rotate every soy field every season, but that is far away."