Argentina’s key resource, its agricultural soils, are being depleted by lack of crop rotation as soy farming encroaches on areas once used for corn, wheat and cattle grazing, according to local experts and a government source. The loss of fertility is a slow-burning threat to crop yields at a time when importers are counting on the world’s No. 3 corn and soybean supplier to increase output to help meet the boom in demand expected over the decades ahead.
The geopolitical stakes are high after Arab Spring and other uprisings were sparked in part by high food prices brought on by crop crises over recent years. China uses Argentine soybeans in animal feed, as the Asian giant’s increasingly powerful middle class comes to demand a higher protein diet of beef and pork. On the Pampas farm belt, the trend toward soy at the expense of corn could rob Argentina of its natural advantage as an agricultural powerhouse in the decades ahead. The country’s farm sector has long feuded with President Cristina Fernandez, who was re-elected in 2011 on promises of increasing state control of Latin America’s No. 3 economy.
Her government limits corn and wheat exports through quotas that can be raised and lowered through the year, dampening competition among buyers and pushing growers toward soybeans, which are taxed at 35 percent but not subject to export curbs. That’s bad for soils in need of regular corn planting. The stalks left by corn provide mulch that allows rain to enter the ground. When water can’t sink in, the runoff carries away soil nutrients and makes fields more vulnerable to summer dry spells. “Because corn and wheat cultivation is punished by the government, farmers are forced to cut their risks, focus on short-term profits and plant soy,” said Manuel Alvarado Ledesma, an agricultural consultant in Buenos Aires….
Complaints about government intervention are heard from other business sectors as well. Fernandez has nationalized the country’s main oil company, cut access to U.S. dollars in a bid to halt capital flight and increased state spending ahead of the October 27 mid-term congressional vote. Annual inflation is clocked by private economists at about 25 percent, one of the world’s highest rates.
And, if you start looking at where the peso (constrained by fairly strict capital controls) is trading on the black market (around ten to the U.S. dollar in some places, compared with an official rate of about 5.8), an approach favored by some inflation economists, the “real” real inflation rate is very much higher than that.