ARGENTINA: Soya Drives New Rural Prosperity – But for How Long?

By Marcela Valente Reprint | | Print |

By Marcela Valente

BUENOS AIRES, Feb 5 2004 (IPS) - Looking like spaceships that suddenly landed in the middle of the Argentine Pampas, combine harvesters are the symbol of the new rural prosperity, moving relentlessly, deliberately through immense soya fields.

It seems there is no patch of ground in central Argentina that has not been planted with soya. The crop extends beyond field borders all the way to the roadside.

Concession-holders for the roads and railways wanted a piece of the soya pie, so have worked out deals with farmers, allowing them to plant in the otherwise fallow ditches and rail corridors.

Cattle, which for decades reigned over Argentina’s immense central plains, now seem cornered and crowded, making way for soya, now the country’s leading export product.

The legume is responsible for a new sense of well-being in the countryside – which some say could be as fleeting as a summer storm.

In the last year, 70 million tonnes of grains were harvested in Argentina, of which 36 million tonnes were soya. Argentina is now the third leading producer of this crop, after the United States and Brazil, and is the leading exporter, placing 98 percent of production on the international market.

This “green revolution” began in the mid-1990s with the arrival of genetically modified seed, which makes the crop resistant to the herbicide glyphosate.

But the last two years brought new factors – internal and external – that gave the soya business an even bigger boost, and is transforming life in the countryside.

In many towns of the Pampas, primarily in Buenos Aires, Santa Fe and Córdoba provinces, it is common to see farmers out just driving around, showing off their brand new trucks.

“Soya is a crop that doesn’t require much work, so there is no reason to stick around to look after it,” Raúl Elías, a farmer in Córdoba, told IPS.

The devaluation of the Argentine peso in January 2002, after a decade pegged at one-to-one with the dollar, has been a boon to the purchasing power of farmers whose harvests go to export.

Furthermore, drought in the United States and increasing imports by China have combined to push up international prices for this legume, now reaching some 240 dollars a tonne – which is unprecedented in terms of Argentine pesos.

That is one of the reasons why the total area planted with soya has more than doubled in the last five years, Jorge Solmi, of the Argentine Agrarian Federation, told IPS.

“There are hardly any cows left in the Pampas,” said Solmi, exaggerating to make his point. He farms 100 hectares in the Pergamino area in northern Buenos Aires province.

The “soya frontier” has crept north, west and south, at the expense of other crops, like cotton, potatoes, sweet potatoes, maize, wheat, lentils and artichokes.

Even cattle have felt the impact. According to the latest official figures, the total head count had fallen by two million in Argentina’s leading beef-producing provinces.

Environmentalists say the soya boom will be a bust in the long-term. They argue that even though the profits now are immediate and substantial, over time monoculture wipes out diversity. This creates a situation that might appear to be a pot of gold, but is really very fragile, vulnerable to the fluctuations of the global market.

Agricultural experts warn that without crop rotation, the soil will deteriorate irreversibly, and this could happen just when soya prices begin to slide as a result of ever-expanding production.

But until the pessimistic forecasts come to fruition, soya farmers are living their glory days.

Because soya does not require much care, rural life has shifted away from the farms to the towns scattered across the Argentine countryside, where business and construction – and even some industries – are flourishing.

“It’s been years since we’ve seen piles of bricks and sand on the corner of each block in town. The construction of new homes or remodelling projects is the first thing you notice when there is an improvement in the farmers’ situation,” said Solmi.

Those that farm large extensions of land – national or international companies, cooperatives – are getting rich because of soya prices, and small and medium farmers are paying off debts and once again investing. Even for the poorest in rural Argentina, there is hope in new opportunities and new jobs.

It is not that the regional economies have recovered, but many areas have switched from their traditional crops to soya and, at least for the time being, are enjoying a moment that they know could be ephemeral.

Meanwhile, industry linked to the agricultural sector is looking at a more sustainable future.

Farm machinery manufacturing, mostly combines, cultivators and tractors, shot up 80 percent in 2003 over the previous year. But in addition to generalised increase in output, there was a strong trend towards substituting imports of tools and implements with nationally-made products.

At the warehouses, which not so long ago could be seen closed up along the roads throughout the Pampas, today are operating day and night. And there are several stories of factory bosses who have to go looking for their solderers and painters at their homes because they are needed on the production line.

The Vasalli company, which produces combine harvesters, is emblematic of the economic recovery in rural Argentina. Founded in 1949, the company was always on the cutting edge of farm machinery, but in the 1990s was pushed to the verge of bankruptcy as a result of competition from foreign manufacturers John Deere and New Holland, among others.

Vasalli was producing just 100 harvesters a year at the end of the last decade, and now it is churning out 40 each month, and has 480 employees. The founder’s heirs are considering exporting farm machinery as a means to ensure themselves of new markets once local demand stabilises.

A study by the National Institute of Agricultural Technology found that investment in farm machinery began to decline in 1997, in parallel to the Southeast Asia financial crisis. Investment in machinery continued to slip, falling from 913 million dollars in 1997 to 319 million in 2002. But in 2003 the latter figure doubled.

In combines alone, average sales in Argentina in the 1990s were 995 a year. In 2002, the worst year of the country’s economic and financial crisis, just 550 were sold. Last year, 1,700 were sold. Tractor sales fell from 3,540 to 1,050 in 2002, but returned to their pre-crisis level in 2003 with 3,400 sold.

State coffers have also benefited from the rural prosperity, receiving 20 to 25 percent in export rights – the equivalent of retaining the value of one of every five cargo ships that leave Argentine ports carrying soya to Europe or Asia.

Despite the many observers and experts who warn of the dangers of dedicating half the country’s cultivated area to one crop, farmers and the government alike will try to prolong the soya honeymoon as long as they can. (END/IPS/LA/DV-IF/TRASP-LD/MV/DM/04)