Economics Not Favorable to Argentine Farmers

July 16, 2002

Argentine producers face difficult planting decisions in 2002-03 because of economic uncertainty, according to a new USDA report. Since the 2001-02 planting season, the government defaulted on it's international loans and the country has undergone a severe national economic crisis.

This has created a national banking crisis, high unemployment, and a return to double-digit inflation with the rapid devaluation of the peso. Devaluation is a double edge sword, says USDA. It encourages producers to expand area for some crops but has reduced the availability of credit for all crops.

Crops that are favored by the export policies and that are less costly to produce will expand, while other crops requiring high input costs are more likely to contract in area.

Total harvested area for the major field crops is expected to decrease less than 1%, unlike the expansion of the last four years. Total production, however, is expected to decrease by over 6% from last year's levels, as less high-yielding corn is planted and more lower-yielding soybeans are planted.

Area forecasts, except for wheat, are very tenuous. Wheat is currently being planted and future economic conditions should have little effect beyond that already seen. If economic conditions deteriorate further, and farmers find themselves unable to procure necessary inputs, a further reduction of crop production prospects is possible.

Wheat area is expected to decline 12%; corn area is expected to decline 18%. Sunflower area is expected to expand 16% compared to a 6% increase in soybean area. Sorghum area is relatively unchanged, up 1%. Rice is expected to increase in area by 8%. Cotton is expected to increase by 47% from a disastrous 2001/02 season.