Soy boon for Argentina as Ukraine war boosts prices

A soy field during the harvest season in Lobos, some 100 kilometres west of Buenos Aires, on April 29, 2022. PHOTO: AFP

LOBOS, Argentina (AFP) - Russia's war on Ukraine has sent grain prices skyrocketing - a worry for consumers worldwide but potentially a boon for producers like Argentina, which hopes an influx of soybean "agridollars" will boost its faltering economy.

South America's third-largest economy is the biggest exporter of soybean meal and oil in the world, and only the United States and Brazil export more soybean grains.

Soy represents nearly a third of Argentina's exports and in 2021 contributed US$9 billion (S$12.5 billion) to the state coffers.

This year, the sector is expecting record sales of US$23.7 billion - about US$700 million more than in 2021 - despite a 10 per cent smaller harvest due to severe drought.

"The prospects for the producer are good... There is optimism," said Martin Semino, who sells farming equipment and presides over the Rural Society of Lobos, a fertile agricultural zone southwest of Buenos Aires.

The harvest season is at its height, and workers are labouring from dawn to dusk to clear the fields before the autumn rains arrive.

"Soy is the dollar, the currency of the countryside," Semino told AFP.

In the past, the grain has been a saviour for inflation-troubled Argentina.

A soybean boom in the 2000s is widely considered to have helped the country recover from its worst economic crisis in 2001.

In the last 40 years, the planted surface area of soy has multiplied 14 times.

'Seize the moment'

Argentina is also a major producer of sunflower oil and wheat - other grains affected by the ongoing war.

After a record sunflower harvest of 3.4 million tonnes in 2021-2022, the area under cultivation is set to increase by 17 per cent this season to two million hectares.

The country also had a record wheat harvest this season.

Estimates are that in 2022, Argentina's agroindustrial exports will bring in a record US$41 billion - about US$3 billion more than in 2021.

Argentine farmer Martin Semino walks at a soy field in Lobos, west of Buenos Aires, on April 29, 2022. PHOTO: AFP

"With prices close to historic records, Argentina, which always needs dollars, must seize the moment," Tomas Rodriguez Zurro, an analyst at the Rosario Stock Exchange, told AFP.

The rise in prices "is temporary, it will end when the war is over", he cautioned.

But some point out that Argentina could have reaped an even larger benefit if it weren't for rising input costs.

Argentina imports about 60 per cent of the fertilisers needed to grow food - around 15 per cent of it from Russia - but supplies are now short and prices climbing, meaning lower yields.

Argentina is also a major producer of sunflower oil and wheat - other grains affected by the ongoing war. PHOTO: AFP

Higher fuel prices are also taking a toll, set against the backdrop of soaring consumer inflation of around 60 per cent projected this year for Argentina.

The chambers of the Oilseed Industry (Ciara) and Grain Exporters (CEC) have warned that rising input costs - as well as shortages of fuel and fertiliser - have "neutralised, or worse, the relative benefits" derived from the commodity price rise.

Added Semino: "Input costs have exploded with the war."

Angry farmers

In April, farmers staged a protest in Buenos Aires to express their ire at government plans to impose a windfall tax on products boosted by the war in Ukraine.

The tax, imposed only on those earning more than a billion pesos (S$12 million) in net profit for the 2021-22 season, would be used to cushion inflationary shocks for the poor.

Argentina has a 37 per cent poverty rate.

The government has also introduced quotas on wheat and maize, the latter of which Argentina is the world's second-largest exporter of.

It has announced a so-called "wheat stabilisation fund" seeking to ensure that the price of the staple grain - and hence bread - remains shielded from steep fluctuations.

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