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Friday, July 19, 2024 | Back issues
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Argentina’s grain shipments reach record level yet wildfires and conflict darken 2022 forecasts

Grain exports are at all-time highs for Argentina, but regional drought and Russia’s invasion of Ukraine are set to impact this year’s harvest and push grain prices upward.

(CN) — Argentina grain exports for 2021 topped 60.66 million tons, delivering the South American nation the largest volume of grain shipments in its history, according to the Rosario Board of Trade

Last year’s level was 7% more than 2020 and slightly surpassed the previous record back in 2019 by 0.6%.

It marks a strong recovery since the pandemic provoked global descents in consumption and international trade. And with higher food demand, grains are rising in price and volume.

Argentina’s top three exported grains were corn (38.4 million tons), wheat (11.6 million tons) and soybeans (5.2 million tons). At the global level, Argentina is the world’s leading exporter of soybean meal (35.7%), the third largest exporter of corn (17.1%) and soybeans (6.3%) and the seventh largest exporter of wheat (5.5%).

The volume of corn exports rose year-on-year by 6%, while wheat rose by 13%. However, the volume of soybeans fell by 22%.

The destinations for Argentine grains were spread across Latin America, Asia, Africa and Europe, with China (13.4%) being the largest country recipient followed by Brazil (11.7%). Exports to Europe were down by 28% while exports to Latin America rose by 18%. Just over half of grain exports were shipped to Asia.

Grain export figures hold much weight in Argentina. Agriculture and ranching dominated the economy for large parts of the 19th and 20th centuries. Today, the country remains one of the world’s major agricultural exporters – grains, oils, beef, and dairy make up 36% of Argentina's total exports. 

Although the volume of grain shipments is at record highs, the number of farmers growing crops is concentrating in fewer hands of Argentina’s rural landed class. And despite positive export figures for 2021, Argentina faces an uncertain and volatile harvest for the 2021/2022 season, with soaring summer temperatures triggering droughts and forest fires in the northern provinces.

In the subtropical northeastern province of Corrientes, wildfires engulfed 10% of its territory, known for cattle breeding and the growing rice, tobacco, tea, soy and citrus fruits. The governor of the province issued a state of agricultural emergency, with thousands of firefighters from across the country, as well as delegations from neighboring Brazil and Bolivia, fighting the flames.

Running alongside the eastern border of Corrientes is the Paraná River, the second-longest in South America and a vital waterway for transporting grains from the farm belt for export. Yet drought has led to its lowest levels since 1944 (its flow rate dropped from an average of 17,000 cubic meters to 6,200) and limited the volume of grains for transport.

The drought, which has also affected areas of Brazil, has pushed the price of soybeans upward, rising by $4.80 to $593.20 per ton, as producers scale back their production estimates for 2022. Together, Argentina and Brazil grow half of the world’s soybeans. Soy production is expected to reach its lowest levels in 14 years during this year’s harvest, 30% less than expected. 

Rising grain prices are not only consequences of worsening climate conditions but also military conditions, with Russia’s invasion of Ukraine provoking volatility in the price of wheat and corn – with wheat rising by $5.10 to $298 per ton and corn rising by $4.50 to $262.10 per ton.

Russia and Ukraine are major grain exporters, accounting for 19% of global corn exports, 29% of wheat exports and 80% of sunflower oil exports.

Countries that rely on food imports worry that further conflict would limit the movement of crops and trigger a struggle to replace supplies from elsewhere.

The Ukrainian military suspended commercial shipping from its ports last Friday, while Russia closed off the Azov Sea for commercial vessels. Its Black Sea ports remain open yet Ukraine has asked Turkey to close the waterways to Russian ships.

In the Argentine capital of Buenos Aires, agriculture minister Julián Domínguez announced back in December quotas on corn and wheat exports during 2021/2002 in an effort to prevent domestic grain shortages and the rising cost of food prices. Last month, the basic food basket (which measures the average price of basic products such as bread and milk) increased year-on-year by 44.7%.

With major export disruption in Eastern Europe, any advantages that are passed on to other global grain exporters, such as Argentina or Brazil, would be offset by volatility in a key agriculture ingredient: fertilizer. Russia is a major global supplier of fertilizer products, and it has banned its own exports in an attempt to hold down domestic food prices.

This will drive prices of fertilizer upwards and hurt crop growth in Argentina and Brazil. And higher production costs may accelerate the global price of wheat and corn.

Speaking on the economic consequences of Russia’s invasion of Ukraine, the World Trade Organization’s Director General Dr. Ngozi Okonjo-Iweala said in a virtual event: “There’s going to be a big impact with respect to wheat prices and prices of bread for ordinary people.”

Fluctuations in the price of crops are ordinarily exposed to the unpredictable nature of weather conditions. Yet if the winds of war continue to blow across the fields of global grain exporters, it’s likely going to lead to a shortage of food around the world, particularly in countries dependent on food imports.

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Categories / Business, Economy, Environment, International

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