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A sea of soybeans

Argentina believes it can be the brightest spot on the world’s agricultural map, mainly thanks to its phenomenal capacity to grow 50 million acres of soybeans

When the world thinks of Argentina and agriculture, it may drool over slabs of grilled beef big enough to fill any plate. But when Argentina thinks of agriculture, it thinks of something even bigger — the soybean.

Argentina is becoming a dominant global player in farm production, says Gustavo López, a market research consultant for Agritrend based at Rosario, and driving that growth is its soybean production.

Farmers have latched on to the oilseed like no other agricultural commodity, López says. Production has quadrupled from 11.5 million tons grown on 12.5 million acres in 1990, to 50 million tons on 50 million acres in 2013 — and there’s no sign of slowing.

Despite a 35 per cent export tax levied on soybeans by the Argentine government, shipments are booming, says López. Last year, soybean exports topped $26 billion — making it the No. 1 export for the country, and miles ahead of cereals, automotive and petrochemical exports.

Argentina’s exports fuel 60 per cent of worldwide biodiesel use, and they supply more than 40 per cent of global trade in soymeal and soy oil. The country is also a leader in producing secondary soy products including lecithin and glycerine.

The nation is pinning its future on continued soybean expansion. Aside from the export taxes generated, soybeans are “Argentina’s most important source of foreign currency,” says Lorenzo Basso, secretary of agriculture, noting the stability the oilseed has brought during Argentina’s recovery from economic crisis.

While soy oil and soymeal are sought by India and the European Union, respectively, China is — and will continue to be — Argentina’s main customer, says Basso. The United States Department of Agriculture predicts Chinese soybean imports will grow from 71.6 million tons in the coming season, to 102.9 million tons by 2022.

Argentina has multiple competitive advantages that solidify its position as a leading supplier to China. Soybeans are cheaper to grow than wheat and beef, which makes the crop more attractive to farmers in a country where credit access is limited. Argentina’s farmers are also quick to adopt technologies ranging from no till to new traits.

Plus, its soybean production is geographically efficient. In the region surrounding Rosario City — Argentina’s agricultural hub — more than 50 per cent of the nation’s soybeans are grown. Supported by an 80-kilometre up-river system, Rosario’s port is the gateway for 98 per cent of all Argentina’s soybean exports. It’s no surprise then that Rosario is the second most important city in Argentina, after the capital, Buenos Aires.

“Argentina is highly concentrated,” says Rogelio Ponton of the Rosario Board of Trade, adding more than 85 per cent of transport in the region is by truck, and 12 per cent by rail. “We used to have a great rail system until it became state owned in the 1990s.”

Ponton says Argentina’s typical soybean travels less than 300 kilometres from field to port or crushing facility. This is a stark contrast to production regions in Brazil and the United States where soybeans can log upwards of 2,000 kilometres in transport, he says.

“It’s hard to find a competitor with this efficiency in other countries,” adds López.

Argentina’s soybean-crushing facilities are second only to China in modernization, but lead the world in efficiency — and are not yet producing at full capacity, Ponton says. With only 41 plants, the country has an impressive daily crushing capacity of 195,000 tonnes. Compare this with China’s 190 plants at 350,000 tonnes daily capacity, and Brazil’s 109 plants at 150,000 tonnes daily capacity.

Yet, the situation isn’t all rosy. In addition to the 35 per cent export tax on soybeans, Argentina’s farmers face other challenges.

Logistically, López says, Argentina’s rails, ports and roads ranked 82nd, 88th and 89th of 139 countries assessed in a World Economic Forum ranking infrastructure and logistics in 2010-11.

“We are working on improvements, but there are still a lot of problems,” López says, adding crop storage is also scarce.

Soil quality is an issue too. “We need to find different mechanisms to improve crop rotations and fertilizer use,” López says, adding this is particularly difficult considering that 50 per cent of Argentina’s cropland is rented — often under short-term agreements.

Looking ahead, López is encouraging Argentinean farmers to become more sophisticated, joining forces with other South American suppliers. “We’re competing with ourselves,” López says. “We need to get together with our Mercosur region (which includes Brazil, Paraguay, Uruguay and Venezuela) so we can compete for the first time with the U.S. and EU.”

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