Export regulations and taxes Rising inflation and government policy are cutting into margins for agricultural commodities
BUENOS AIRES, Argentina (Reuters) — Big farming companies are renting less land in Argentina because of lower profits caused by high inflation and government interventions, including a clampdown on dollar purchases.
Falling profits are hitting many of the large-scale growers who fueled Argentina’s soybean production boom over the last decade. Smaller-scale farmers are now starting to work land that the big players have left behind.
“Land rental prices have stayed the same while other costs of production have risen,” said Rafael Llorente, a major producer who last year planted 62,000 acres in the northeastern corner of the farming-intensive Buenos Aires province.
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Llorente now expects to seed only 49,000 acres in the 2013-14 season, which starts this month.
Agriculture is the main pillar of the Argentine economy, but farmers have been at odds with president Cristina Fernandez’s government for years. They blame her for the sector’s problems because of state-centric policies, including strict export regulations and heavy taxes.
The government limits corn and wheat exports to ensure ample domestic food supplies. As well, soybean shipments are taxed at 35 percent.
El Tejar Ltd., the world’s No. 1 grain producer with 1.7 million acres under cultivation in Argentina, Brazil, Uruguay, Paraguay and Bolivia, is cutting the amount of land it uses in Argentina. As well, local farm production company Los Grobo is focusing its expansion plans across the border in Brazil.
Problems facing the private sector in Argentina include inflation clocked by private estimates at 25 percent and tight foreign exchange controls that limit access to dollars.
Farmers pay for some of their inputs at the black market exchange rate, but they get paid at the official interbank rate, which offers a nearly 70 percent discount per dollar.
“For the first time in many years, the agricultural margins of corn, soy, wheat and sun seeds are producing losses,” said Ernesto Ambrosetti, an economist at Sociedad Rural Argentina.
Added Marcelo Carrique, who cultivates 15,000 acres in Daireaux, in western Buenos Aires: “Some big players have been pulling back because it hasn’t been an easy year, and going forward the picture doesn’t look good either.”
The planting area for Argentina’s three main crops of soybeans, corn and wheat encompasses 74 million acres.
“Large producers have retreated and other people with a different model have come in their place,” Carrique said.
Smaller farmers are often more flexible than the cost-heavy frameworks of large pools that form to plant grain in Argentina’s vast Pampas farm belt.
“There’s been a lot of movement this year,” Carrique said.
“The business is really tight: costs keep rising, grains prices fall and that makes you rethink the business.”
The U.S. Department of Agriculture forecasts Argentina’s 2013-14 soybean crop at 53.5 million tonnes, the wheat harvest at 12 million tonnes and corn at 26 million tonnes.
