September 29, 2023

Major crop trading houses urge Argentina's next president to boost soy production and exports

Leading crop trading giants, including Cargill Inc, Louis Dreyfus Co, and China's state-owned Cofco Corp, have voiced a collective plea to Argentina's upcoming president to boost soy production and exports or risk losing ground to competitors Brazil and the US, Buenos Aires Times reported.

At a soybean conference held in Rosario, the heart of crop trading, Pablo Scarafoni, head of Commercial Operations for Cargill in South America, lamented Argentina's waning influence on the global agricultural stage.

Once a dominant regional player, Argentina's agricultural sector has endured setbacks due to excessive state intervention. Scarafoni underscored the contrasting growth of Brazil, fuelled by supportive political and economic conditions, and the US, driven by biofuel mandates, while Argentina's soy production remains stagnant.

As Argentina prepares for the presidential election on October 22, indications suggest a shift away from heavy state involvement in the economy, which has led the resource-rich nation into a protracted crisis. Argentina currently grapples with negative net reserves of dollars, nearly 125% inflation, and a high poverty rate affecting two in every five Argentines.

Agriculture has suffered significantly due to numerous government restrictions and three consecutive droughts. Export taxes reaching up to 33% for soy, export quotas, and currency controls have hampered farm revenues and investments.

While the Argentine Pampas and the Rosario port complex remain vital grain and oilseed export hubs, the agricultural sector has fallen short of its potential over the past two decades. The major trading houses now implore the incoming government to shift gears and assist, rather than hinder, this crucial export dollar-contributing industry.

Juan Jose Blanchard, head of Latin America at Louis Dreyfus, highlighted the urgent need for action. He said a ship that arrives today to load soy at Paraguana in Brazil has to wait 65 to 70 days while Argentine ports are empty. He said the country needs to act now because Brazil is a steam train and in a few years it'll have three, four, or five more ports, and soy ships will sail in just five days.

For the incoming president, the potential benefits of scrapping multi-billion-dollar crop export taxes and currency controls are clear. Such a move would provide farmers with more capital for investments, especially in fertilizers, creating a ripple effect of increased business for traders and, ultimately, more economic activity and dollars for Argentina.

-      Buenos Aires Times