MercoPress. South Atlantic News Agency

The success of Brazilian farming and Argentina’s disarray

Brazil is targeting 300 million tons in ten years time

If forecasts are confirmed the 70 million tons of the 2008/09 Argentine harvest would represent 2.9% of the world’s grain production when in previous crops it had reached 4.2%. Brazil in the meantime will have reached 5.5% of world production. Only a few years ago the difference was minimal with Brazil almost 4% and Argentina above 3%.

According to the latest statistics from Argentine farmers organizations, and published in the Buenos Aires press, the two senior partners of Mercosur represent globally the equivalent of 8 to 10% of the world grains and oilseeds production, but Brazil although much slower in implementing structural reforms has been more successful in overall production.

Argentina farmers’ organizations argue that in spite of the fact that Brazil introduced genetically modified seeds later than Argentina, has been slower in privatizing ports and in taking advantage of South America’s huge waterways, the 2008/09 harvest is expected to reach 135 million tons, almost double Argentina.

Looking back while in 1999/2000 the relation between Brazil/Argentina production was 1.3 (83 and 65 million tons); the ratio jumped to 1.4 in 2006/07 (133 and 95 million tons). And looking into the future the situation seems even more depressing for the Argentine farmers: while Brazil is planning a 300 million tons crop in the coming ten years, Argentina remains embroiled in the “conflict with the Kirchners’ administrations over export taxes”.

Furthermore when international prices ballooned the Kirchner administrations levied windfall earnings in an alleged attempt to contain prices of the basic basket, but also to increase tax revenue for political reasons.

Brazil however did not innovate and applied a policy to absorb the inflationary impact of higher food prices, with inflation estimated to increase 4% in 2009. The strategy of the Brazilian government was to promote supply, helping the domestic market and boosting exports.

The Argentine farmers report also points out to the more harmonic development of Brazilian agriculture which is not soy-dependent to the extreme it has reached in Argentina. On the contrary Brazil has also promoted dairy and beef farming, helping to overcome the domestic market/exports dichotomy.

Such is the case that in the nineties Brazil participated with 2% of world beef exports, but now has jumped to 12.3%, while Argentina remains at 2%.

Brazil has intelligently managed to address the domestic market/exports dilemma from the supply side and did not fall to the temptation of volatile short term revenues, concludes the report.