Argentina is a principal exporter of many agricultural products. Argentinian food crops dominate the agricultural market in the region. Two-thirds of Argentina’s exports are agricultural. Maize is the most important food crop, followed by wheat and barley. It has a 15% share of the world’s grain and byproducts trading. Wheat exports in MY 2020/21 are forecast at 13.4 million tons.

Argentina is the third-largest economy in Latin America, with a population of approximately 44 million. It has vast natural resources in energy and agriculture. Within its 2.8 million square kilometers of territory, Argentina is endowed with extraordinary fertile lands. It is a leading food producer with large-scale agricultural and livestock industries.

However, the historical volatility of economic growth and the accumulation of institutional obstacles have impeded the country’s development. Urban poverty in Argentina remains high and reaches 35,5% of the population. Financial turbulences in 2018 impacted the country and implied the revision of the economic plan and the need for a program with the International Monetary Fund (IMF). The economic situation presents a precarious balance. The Argentine peso has lost 68% of its value since 2018. Annual inflation is over 50% and after a 2.5% fall of GDP in 2018, the economy contracted an additional 2.2% in 2019.

Argentina has a longstanding tradition as one of the world’s largest agricultural producers. The country has a solid comparative advantage in agriculture due to its exceptionally fertile lands, especially for cereal and livestock production. The country has a vast network of industrial and small-holder farmers; it is the world’s third-largest producer and exporter of soybeans after the US and Brazil. It produces 5% of the world’s grains and exports large amounts of wheat and corn. It has a 15% share of the world’s grain and byproducts trading.

The geographical spread across elevation and latitude provides Argentina with a wide range of climate zones. The large physical size of the country supplies ample agricultural and pastoral land for Argentina’s population. The array of climate zones enables Argentina to produce many kinds of agricultural products, including cereals, oilseeds, horticultural crops, peanuts, dairy, beef and sheep products. The volume of these agricultural products is often surplus to domestic requirements and so Argentina is a principal exporter of many agricultural products. Grain production in Argentina is centered mostly in three provinces —Córdoba, Santa Fe and Buenos Aires. These three provinces are the source of around 80% of the nation’s crop production.

Argentinian food crops dominate the agricultural market in the region. Two-thirds of Argentina’s exports are agricultural. Maize is the most important food crop, followed by wheat and barley. Climatic conditions, coupled with good knowledge about transfer activities, are the factor driving the agriculture sector in the country. Support through various agricultural organizations like ACSOJA, which helps to promote the scientific-technical research in production and industry areas, as well as commercialization of agricultural products, aids in the growth of agriculture in the country.

Argentina is re-emerging as an important southern hemisphere producer and exporter of cereals, with wheat production growing and remaining a key feature of Argentinian grain production. It is one of the world’s biggest exporters of wheat and wheat flour and it has the highest per capita wheat consumption in South America. Wheat area has increased as a result of the policies put in place by President Macri’s administration. Argentina’s grains industry has largely self-funded its industry-good functions. Rather than rely on government funding and action, the grains industry has established and supported its own set of industry-good organizations.

While yield and production variability are important features of a country’s grain sector, even more important to global grain markets is the volatility of a country’s exportable surplus. Argentina’s population is not rapidly increasing and there is unlikely to be any further increase in per capita flour consumption, which at around 80kg per capita is already high by international comparison. Hence, with a stable domestic consumption of around 6mmt of wheat, additional Argentinian wheat production will need to be exported, either in bulk or as flour. Argentina has a comparative advantage in supplying flour to neighbouring countries but not beyond those, so it is more likely that exports of bulk wheat will increase. As the Argentinian area and yield of wheat increases, Argentina will become a more reliable, albeit minor, exporter of wheat. Argentina will be able to invest in longer term trade relationships with key customers, such as Mercosur countries and perhaps some strategically important west African countries.

In Argentina, there is about 40–60 mmt of storage capacity on-farm, with more than half this being silo bags and the remainder steel silos. There is a further 70 mmt of grain storage in upcountry elevators, warehouses, ports, and feed and flour mills. About half of the wheat produced is transported to port shortly after harvest. The remainder goes to warehouse storage (including mills) or remains slightly longer in farm storage.

Argentina’s wheat production is destined to consistently reach around 21 mmt towards 2025, with its area planted to wheat possibly increasing by a further 2 million hectares, depending on price incentives. Argentina’s domestic requirements are likely to remain at between 6 mmt and 7 mmt, so around 14–15 mmt will regularly become available for export.

USDA projects wheat production for marketing year (MY) 2020/21 at 20.0 million tons. Due to positive global prices, farmer’s interest in wheat production is strong and they are expected to utilize good technology and high levels of inputs this year.

Wheat exports in MY 2020/21 are forecast at 13.4 million tons (including flour). Destinations are expected to remain consistent with historical trends, with Brazil accounting for roughly 6 million tons (without flour). South American markets include Chile, Peru and Ecuador. Exports to South East Asia will see significant volumes shipped to Indonesia, Vietnam, Bangladesh, Thailand and Malaysia. Large volumes of wheat are also expected to flow to north African countries, USDA reports.

Producers are very worried about the possibility of the government increasing the export tax on wheat from 12 percent to 15 percent, as allowed by Congress. In December 2019 the new government placed a fixed tax of 12 percent (until then the export tax depended on the fluctuation of the exchange rate and at the time of the change it was equivalent to a 6.7 percent tax). The Minister of Agriculture has repeated recently that the government does not plan to increase the export tax.

BARLEY USDA forecasts barley exports in MY 2020/21 at 2.4 million tons, in line with expected smaller production. Roughly half of the volume will be malting barley with the remaining balance in feed barley. Local traders believe that, due to China’s punitive tariffs on Australian barley, Argentina will increase exports of intermediate quality barley (FAQ – fair average quality) to China and reduce its exports of feed barley to Saudi Arabia, which could increase sourcing from Australia. Ecuador and Peru will likely import malting barley from Australia instead of Argentina.

CORN Corn is one of the main crops grown in Argentina. USDA projects the MY 2020/21 corn crop will trend down to 47.6 million tons. And exports are projected at 33 million tons. Vietnam is expected to be the number one destination with 20-25 percent of total corn exports, followed by other Southeast Asian markets as well as destinations in Africa. Argentina’s main export window is between March, when the harvest begins, and July/August when the Brazilian zafrinha corn enters the commercial market. In the second part of the year, exports diminish each month.

MILLING INDUSTRY Wheat milling is an important value-adding component of the Argentinian wheat industry. A tonne of flour converted into baked goods multiplies its value around eightfold. According to the Argentinian Federation of the Milling Industry (FAIM), the Latin American country has 13.5 million annual tons of milling capacity. There are 190 milling plants in the country. In the 2001-2014 period, over 100 new mills were installed as a consequence of an interesting profitability level fostered by informal competition. However, the milling industry shows low, null and negative profitability due to the unused installed capacity of up to 50% and the existence of unloyal competition.

Flour mills are located as follows: 84 plants in the province of Buenos Aires, 39 in the province of Córdoba, 24 in Santa Fe, 15 in Entre Ríos, six in Tucumán, five in Salta, four in La Pampa, two in San Juan and Jujuy, and one plant in each of the provinces of San Luis, Santiago del Estero and Chaco.

The FAIM also reports that 29 plants in Argentina have a milling capacity of more than 360t per day, 61 plants between 120 and 360t per day, 49 plants between 34 and 120t per day and 45 plants produce less than 34t a day.

Wheat and corn mills were given a monthly subsidy for the volume of wheat sold in the domestic market. However, these subsidies were removed in 2017. There is a 10% import tariff on wheat and a 12% tariff on imported flour and 16% for its subproducts.

The milling industry in Argentina mostly has a strong local and nearby market focus. There is little prospect of Argentina, with its limited growth in wheat production over the next decade and mostly small sizes of flour mills, being able to command a large presence in global flour markets. Its most likely future will remain servicing domestic flour demand as well as exporting to nearby Mercosur countries.