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Argentine Agricultural Sector
Impact of new policies and trade tensions
Ramiro CostaDeputy Executive Director
Buenos Aires Grains Exchange, Argentina
AGRICULTURAL LONG-TERM OUTLOOK FOR ARGENTINA (ERAMA 2027/28)
WHAT TO EXPECT FOR 2018/19 AND 2019/20 CROP SEASONS?
RECENT CHANGES IN AGRICULTURAL POLICIES
ECONOMIC CONTEXT AND INCENTIVES
AGRICULTURAL LONG-TERM OUTLOOK FOR ARGENTINA (ERAMA 2027/28)
WHAT TO EXPECT FOR 2018/19 AND 2019/20 CROP SEASONS?
RECENT CHANGES IN AGRICULTURAL POLICIES
ECONOMIC CONTEXT AND INCENTIVES
11º world supplier
3% of agro-industrial exports
ARGENTINA
USD 36.7 billion
60% of total exports
AGRICULTURAL EXPORTS OF ARGENTINA
!Soybean complex accounts for
almost 50% of Argentine agricultural exports.
Main products (AVG 2015-17)
26%
9%
Corn 10%
Wheat 5%
Shrimpsand prawns 3%
Wine2%
Bovine meat 2%
Peanuts 1%
High inflation, Overvalued Exchange rate Increase in export duties Quantitative restrictions Limitations on the foreign exchange market
MACROECONOMIC INSTABILITY
2007-2015
Government intervention in wheat domestic price setting.
Export quotas Export duties
1980’s
HIGHLY REGULATED AGRICULTURAL SECTOR
Elimination of export quotas and export duties
DEREGULATION
1990’s
2000’s
2002 Economic crisis Depreciated exchange rate Reintroduction of export duties
CRISIS
2016
AGRICULTURAL POLICIES IN ARGENTINA
Removal of currency controls Elimination of export restrictions Elimination and/or decrease of
export taxes
NEW ADMINISTRATION
IMPACT OF POLICY MEASURES
5%
2%
1%
3%
1993-1999 2000-2006 2007-2015 2016-2017
Evolution of Area Growth-Rate (%) in Argentina
Economic institutions shape economic incentives: the incentives to become educated, to save and invest, to innovate and adopt new technologies, and so on.
― Daron Acemoglu, Why Nations Fail:
The Origins of Power, Prosperity, and Poverty
“
IMPACT OF POLICY MEASURES
!Argentinean farmers: early adopters of new
technologies whenthey face positive economic
incentives 11 13 21 9 10
42 50
50 57 54
47 37 29 34 36
10/11 12/13 14/15 16/17 17/18
Low TL Medium TL High TL
Great increase in fertilizer application and no-till farming since 16/17.
Level of technology adoption in ArgentinaApplied Agricultural Technology Survey
AGRICULTURAL LONG-TERM OUTLOOK FOR ARGENTINA (ERAMA 2027/28)
WHAT TO EXPECT FOR 2018/19 AND 2019/20 CROP SEASONS?
RECENT CHANGES IN AGRICULTURAL POLICIES
ECONOMIC CONTEXT AND INCENTIVES
2018
New export duties
RECENT CHANGES IN POLICIES
2019
MAIN TWO FACTORS OF
UNCERTAINTY
RECENT CHANGES IN POLICIES
Changes in local policies
&
Trade tensions
NEW MEASURES APPLIED IN ARGENTINA
% Change in Export Duties
+ 2
+ 5
+ 5
+ 10
+ 10
26
23
23
0
0
28
28
28
10
10
Soybean
Soybean Meal
Soybean Oil
Wheat
Corn
p.p.
CROP SEASON 2018/19
Production Estimates(Million Tons)
53
45
19
3,9
+2
-0,7
Hydric Balance
EFFECTS OF TRADE TENSIONS ON SOYBEAN
Soybean FOB Prices (usd/tn)
58 6371
82 8396 88
0
20
40
60
80
100
120
2012 2013 2014 2015 2016 2017 2018
China soybean imports(millions tns) - 8%
0.3 0.3 0.6 0.7 0.7
2.22.9
0.8
0.0 0.0 0.0 0.0 0.0 0.0
0.9
1.9
6.4
0
1
2
3
4
5
6
7
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Argentina soybean imports (million tns)
6.4
EFFECTS OF TRADE TENSIONS ON SOYBEAN
Monthly Crushing (Million tons)
1
2
2
3
3
4
4
5
5
Jan Feb Mar Apr May Jun Jul Ago Sep Oct Nov Dec
range 2017 2018 Average Last 5 periods
!Trade tensions have boosted demand for Argentine
soybeans at the expense of byproducts.
AGRICULTURAL LONG-TERM OUTLOOK FOR ARGENTINA (ERAMA 2027/28)
WHAT TO EXPECT FOR 2018/19 AND 2019/20 CROP SEASONS?
RECENT CHANGES IN AGRICULTURAL POLICIES
ECONOMIC CONTEXT AND INCENTIVES
Baseline• US-China trade
tensions• New export
duties
Agreement• End of trade
tensions• Only new
export duties
Previous Duties• US-China trade
tensions continue
• Previous export duties
Regular• End of trade
tensions• Previous
export duties
SHORT-TERM ESTIMATES: SIMULATED SCENARIOS
In order to analyze the impact on argentine crushing and exports, 4 different SCENARIOS were defined:
1 2 3 4
SHORT-TERM ESTIMATES: SOYBEAN RESULTS 2018-2019
Source: Elaborated by the Buenos Aires Grain Exchange in collaboration with the INAI Foundation
38 39 41 43
15 11 10
7
Baseline Agreement Previous Duties Regular
Crushing ExportsSoybean (Million tons)
1 2 3 4
SHORT-TERM ESTIMATES: CROP SEASON 2019-2020
Planted Area 2019-2020: 4 main crops (Million Ha)
31.6
32.3
33.3
30.5
31
31.5
32
32.5
33
33.5
2018-19 2019-20 2019-20 Regular
5,4%
2,2%
!Planted area could be 1
million hectares below the potential.
Cereals will grow at a lower rate than soybeans.
4
AGRICULTURAL LONG-TERM OUTLOOK FOR ARGENTINA (ERAMA 2027/28)
WHAT TO EXPECT FOR 2018/19 AND 2019/20 CROP SEASONS?
RECENT CHANGES IN AGRICULTURAL POLICIES
ECONOMIC CONTEXT AND INCENTIVES
ERAMA 2027/2028WORLD AND
ARGENTINE AGRO-INDUSTRY
REFERENCE SCENARIO 2027/2028
LONG-TERM PROJECTIONS: CLOSING POTENTIAL GAPS
Closing gaps among farmers and logistic
improvements
Scenario 3
Scenario 1
Closing yield gaps among
farmers
Efficiency improvements
in logistics
Scenario 2
+4%+12% +16%
Production (Million Tons)
Baseline Scenario 1Logistics
Scenario 2 ReTAA
Scenario 3 ReTAA + Log
FINAL REMARKS
Opportunities Challenges
Source: Estimates Department, Bs As Grain Exchange and INAI Foundation.http://www.bolsadecereales.com/
OUR WORK
Thank you Ramiro Costa
rcosta@bc.org.ar
http://www.bolsadecereales.com/Buenos Aires Grains Exchange,
Argentina
IMPACT OF POLICY MEASURES
Producer Support Estimate (PSE) % of Gross Farm Receipts (GFR)
3%
13%
9%
21%
5%
12% 17
%
0%
-31%
2%
10%
10%
21%
4%
16%
15%
-8%
-12%
A U T R A L I A C A N A D A U . S . A . E . U . B R A Z I L C H I N A R U S S I A U K R A I N E A R G E N T I N A
2007-15 2016
!Argentine farmers received negative
support by government policies.
282.2106.3
42.437.1
31.6
21.1
PRODUCT SUPPORT ESTIMATE (PSE)
EU28 Japan USAChina
48%
Indonesia Korea
6% 4%7% 5%18%
Source: IADB-Agrimonitor and OECD.
Main Supporter CountriesAVG 2013-15 Billion USD
% of Gross Farm Receipts (GFR)
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