Over the last 10 years, there’ve been dramatic changes in Argentine agriculture. Many small soybean producers have been put out of business, and the sector is consolidating fast. Despite the tough environment, many smaller farmers continue to survive, but their days could be numbered.
Due to government intervention in the beef and dairy markets, which kept prices low, many small farmers turned increasingly to producing soybeans. High global prices ensured that they could make a reasonable living compared to dairy and livestock farming.
But these small farmers are coming under increasing pressure. In a study by INTA, the national agriculture institute, it’s estimated that more than 60,000 farms shut down between 2002 and 2008, with the average size of farms increasing from 1,040 acres to 1,329 acres.
“In the Argentine model of agriculture, most farmers hire contractors to do the planting, spraying and harvesting for soybean crops,” says Héctor Gonzaléz, a small farmer from Santa Fe province.
This model has benefited smaller farmers since they don’t need to invest in expensive machinery and enabled many to continue producing soybeans. While this continues to work well, there are other factors stacking up against the small players.
“The main obstacle is land,”says José Garrahan, a small producer from San Antonio de Areco, Buenos Aires province. “To survive as small producers, most traditionally rented additional land to benefit from greater scale, but this is increasingly difficult to do. There is greater demand for rented land and prices have risen dramatically. Much of the best land is being rented by sowing pools, which are investment funds that rent the land for production and share the net benefits after harvesting.”
Another problem for smaller farmers is the growing interest of farmers and corporations from Europe, China, the Gulf and the U.S. in buying Argentine land, which also squeezes Argentine farmers out of the rental market.
There are increasing calls for restrictions on renting or selling land to foreigners. “We’ve campaigned for many years for legislation on this,” says Ulises Forte, a small producer and deputy in the Argentine parliament for the Unión Cívica Radical (UCR) - the main opposition party in the Argentine Congress. “It is important that we push ahead to ensure as much land as possible remains in Argentine hands.”
With small farmers shut out of the rental markets, “ironically they are now starting to rent land to the sowing pools and corporations,” says Garrahan. “It’s the only way to survive. Smaller farmers are also weighed down by the increasing amount of red tape for the certification and transport of harvest to processing centers. Only bigger producers can cover this extra cost,” Garrahan says.
With more and more small farmers opting out ofsoybean production and their place being taken by bigger players, this will make the Argentine soybean sector more efficient and enable it to continue to out-muscle the U.S. soybean sector in export markets.
This is part of a series on agriculture in Argentina by John Kennedy, a writer and economic consultant. You can contact him at [email protected].