Updates on the macroeconomic situation
On December 10, 2019, the new President, Alberto Fernández, took office, with 48.24% of the votes, thus triggering a change from the ruling party in the hands of the opposition to the previous government's coalition.
Argentina’s Gross Domestic Product (GDP) in national currency as of March 2019 was $18,577,746 million. In US dollars, what must be taken into account is that during the first quarter of that year, the exchange rate jumped from $38.60 to $42.98. Thus, as of April 1, 2019, the GDP was US$ 432,241 million, according to the National Institute of Statistics and Censuses (INDEC). The share of world GDP is now 0.51%, when it was 0.78% two years ago. Argentina is now the 28th economy in the world according to the GDP size, but in per capita terms, a ratio that reflects productivity and average annual income per inhabitant, considering that the current total population of the country (INDEC) is 44,938,712 inhabitants, it is at reaches US$ 9,618 per year, when it was US$ 9,428 in 2009, registering just a 2% growth in 10 years. In the world ranking, it is placed in the 71st position, when in mid-2017 it was at 57. In 24 months, Argentina fell 14 positions in the world ranking of countries according to the average annual income per inhabitant.
According to INDEC, Argentina's economic activity in 2019 closed with an annual fall of 2.1%, after the recession worsened in recent months during the tenure of the previous government of Mauricio Macri. The decline is one of the worst results witnessed in the last 10 years, although it improved by five tenths compared to that of 2018. The data from December revealed that the Argentinian economy contracted that month by 0.3% compared to the same month in 2018. On a positive note, the index that measures economic activity registered an increase of 0.2% in the 12th month of 2019 compared to November, when the said indicator fell 1.6%.
In August 2019, after the primary elections, the Argentinian economy suffered a new setback as a result of the economic crisis that began in April 2018, and ended that year with an inflation of 53%, unemployment of 9.7%, according to INDEC, and a poverty index, which reached 40.8%, according to a study by the Universidad Católica Argentina. Argentina’s Ministry of Economy, led by Martín Guzmán, is in talks with the International Monetary Fund to try to renegotiate the Argentinian debt, among which is a loan of US$ 56,300 million.
According to INDEC, in 2019, Argentina exhibited a positive trade balance of US$ 15,990 million as a result of exports of US$ 65,115 million and imports of US$ 49,125 million. The trade surplus is the largest since 2009 when a positive balance of US$ 16,885 million had been achieved. The jump in the dollar, which lowered Argentina’s cost to export, and the recession that slowed imports, contributed to this; in 2019, the value of the dollar climbed from $38.60 to $63 (+ 63.21%) and was later contained by exchange controls, which started in September and deepened toward the end of October. Exports increased 5.4% due to a 12.2% increase in quantities and a 6% decrease in prices. Conversely, imports fell 25% due to a 20.7% decrease in volume and 5.4% in prices. Thus, the exchange rate fell in 2019 by 10.2% to US$ 114,240 million. Argentina thus reversed the trade deficit of US$ 3,701 million that it had in 2018 and that of US$ 8,293 million in 2017. Foreign sales were the highest in five years, since 2014. Purchases, on the other hand, were the lowest since 2009 when there was also a recession due to the international crisis of the previous year. In December 2019, the trade balance registered a surplus of US$ 2,241, being the fourth highest monthly surplus in the last 30 years.
Dynamics of agriculture policies
The initial measures taken by the new administration included an increase in commodity export taxes called retentions. During the previous administration, they have been paying a fixed tax for each dollar invoiced abroad of $3 for industrial products and $4 for agribusiness exports. The new government made a first modification and then another one, with the current values of: 5% for sunflower (12% previously), wheat flour and oils (12% previously), polished rice (9% previously), packaged flint corn (12% previously), flour and sorghum oils (same as before) and corn pisingallo (9% previously). Wheat grains (12%), sorghum (12%) and corn grains (12%) remained at the same tax level. As for soybean, it is 30% (being 33 % for producers of more than 1000 tons per year, and values that are decreasing from 30% for producers of less than 500 tons per year). Beef is subject to a 9% retention. These taxes negatively impact the supply of the sector, contracting its production and investment in technology. If production falls, less foreign exchange comes in and the economy suffers, the prices of the products rise or internal shortages are generated. In some areas, production ceases to be viable, and the producers move to carry out other crops or activities, such as pasturing for livestock.
With respect to national regulations, the companies that commercialize seeds have been demanding that the different governments in force pass a Seed Law that safeguards their patent rights for their use. Although it was not approved in 2019, there will be grounds for its sanction in the future. At present, according to resolution 338/2006, producers can only use their own seeds on the same surface they implanted with certified seeds in the previous cycle. Producers who do not justify the legal origin of the seeds may not make their own use for free.
At a state level, Córdoba, one of the provinces of Argentina, became the first to come up with a law of good agricultural practices. This is the first national regulation that establishes a way of producing non-refundable incentives to those producers who develop responsible and sustainable agricultural practices using a set of principles, standards and technical recommendations aimed at reducing physical, chemical and biological risks in the production, processing, storage and transportation of products of agricultural origin.
Agricultural production and commodity exports
The production data of the main crops of the Argentinian agricultural sector were as follows:
• 2019/20 campaign: 6.9 million ha is the projected area planted for commercial grain, with average yields of 80 qq/ha and an estimated production of 49 million tons for commercial grain.
• For the 2019/20 campaign, the national yield reached 80.2 qq/ha, 5 qq above the average of the last five years. The sowing for commercial grain fell with respect to the last cycle by 1.5% and it is estimated that it would be the second best productive value, being 5% below the 2018/19 record.
• The three provinces that lead the national level are Santa Fe with a mark of 97 qq/ha, Buenos Aires with almost 85 qq/ha quintals, and Córdoba with 84 qq/ha.
• The corn chain contributes to the national economy, with a US$ 10,400 million to the national gross product (versus 7.3 of the previous campaign), in US$ 6,600 million in exports (versus 5.5 in the previous campaign) and US$ 2,400 million in tax collection (versus 1.6 in the previous campaign).
• The prices of the main crops according to the market prices at term (Sep-19): wheat US$ 229/ton, corn US$ 130/ton, soybean US$ 238/ton and sunflower US$ 242/ton. Presenting the following interannual variations: wheat 15.7%, corn -11%, soybean -5.5% and sunflower -8.7%.
• Four out of every 10 dollars exported by Argentina in 2019 was generated by corn, wheat and soy. Argentina’s exports reached US$ 65,000 million in 2019, of which 37.4% were due to the soy, corn and wheat complex (24% soy complex, 9% corn and 4% wheat complex).
• Corn sales abroad grew 56% in 2019 to reach a record 36 million tons. This increase was greater than the growth of national corn production during the 2018/19 campaign, which was 31% higher than the previous campaign. In contrast, the average cereal export price fell US$ 16/ton in 2019, becoming US$ 164/ton, 5% below the average of the last five years.
• Argentina began to export corn seeds to different countries across the world, to complete the shipments; the National Service of Agrifood Health and Quality had to analyze the samples to verify the requirements of importers from the Philippines, Senegal, Azerbaijan and Mexico.
• 2019/20: 17.7 million ha is the projected area planted. The estimated production would reach more than 54 million tons. Performance expectations are above the averages of the last campaigns.
• The exports of the soy complex represented 43.5 million tons in 2019, 35% higher than the previous year. The main component of this increase was the recovery of soybean exports, whose sales increased by 178%, from 3.7 million tons in 2018 to 10.2 million in 2019. Exports of soy sub-products also saw an improvement over the previous year (+ 28% oil and 15% flour).
• Although there was a recovery in the volume sold, the price decreased for the three products. The export price fell 17% for soybean flour, 14% for beans and 7% for oil, the three values below the average of the last five years.
• In 2019, an agreement was signed with China, to open that market to Argentinian soybean flour, which would imply the possibility of exporting five million tons that would imply a level of approximately US$ 1.600 million.
• Cotton planting season in 2018/19 had a planted area of 441 thousand ha with a production of 872 thousand tons of brut cotton and an average yield of 2600 kg/ha (596 net kg/ha).
• In 2019, an objective pursued by the producers for many years was reached, the tariffs that taxed the importation of combines were lowered from 28 to 7%, and the same was set with respect to ginders.
• In 2019, commercialization was not been simple, climatic avatars delayed the offer, which caused a firm local demand and good values that partly offset both the fall in international prices (since mid-year) compared to the previous campaign and the lack of forward sales that cushion a more depressed international market; from mid-campaign onwards, cotton of very low quality due to bad climatic circumstances began to be marketed at very low prices.
• 2019/20: 6.6 million ha of planted area with average yields of 29.9 qq/ha (lower than those of the previous campaign, but with yields of 39qq/ha in the core zone and maximums that reached 60 qq/ha), with a production of 19 million tons.
• Wheat exports of the 2019/20 harvest are projected at 13 million tons (against 11.3 million / ton in the previous campaign and 10 million / ton in 2018).
• Wheat milling was 6.3 million tons (versus six million tons in the 2018/19 campaign).
• Wheat exports rose 14% from 10 million tons in 2018 to 11.3 million in 2019. Wheat flour showed a similar pattern, increasing sales abroad by 7% in 2019.
• The 2019/20 saw a campaign was planted area of 1.6 million hectares (15.8% less than the previous campaign, but 40 thousand hectares above the average of the last five years), with a projection of 3.2 million tons of production, with yields of 21.1 qq/ha (at the stage of harvesting 32% of the planted area) and area yields recorded up to this stage that are located above the average historical values. Estimates indicate an average yield of 23 qq/ha, reaching a maximum of 30 qq/ha.
• The decrease in the area planted in the 2019/20 campaign with respect to the previous one is due not only to the water excesses present in the in the north of the country but also to a more unfavorable input-output ratio.
• Sunflower complex exports for the first 10 months of 2019 increased from US$ 567 million to US$ 747, with an increase of 31.7%. In the case of oil, an increase of 32.7% (US$/ton 394 to US$ 523) has been verified. Grain exports rose 68%, reaching US$ 74 million, while the sale of flour grew 16.3% to US$ 150 million.