Right Place and Time for GM Corn in Argentina

Corn production in Argentina

Still suffering from a major drought starting in November 2017, Argentina’s corn production forecast has fallen in recent projections. Planted area decreased by 100,000 hectares and projected corn production fell 2 million tonnes to 40 million tonnes in the latest Global Agricultural Information Network (GAIN) report from the USDA’s Foreign Agricultural Service.

Poor corn performance in Argentina was caused by developmental delays of the first crop planted in the provinces of Buenos Aires, Cordoba, and Santa Fe. Drought conditions have also delayed the second crop planting still underway in Salta, Tucuman, Santiago del Estero, and Chaco. Approximately 35 to 40 percent of first crop corn was planted before December 2017 and is generally planted in Argentina’s most productive areas. Most of the critical corn “silking” phase occurred in the middle of a dry, hot season, drawing down yields. In a last ditch effort to recover costs, many farmers are selling their stunted corn as silage. But by boosting yields by as much as 37 percent, use of GM corn softens any long term impacts caused by the drought, ensuring resurgent production in coming years.

GM crops in Argentina

Argentina’s National Advisory Commission on Agricultural Biotechnology (CONABIA) started regulatory oversight of GM crops in 1991. While the elimination of tariffs unlocked corn’s export potential, the introduction of GM corn has enabled increased production. Insect-resistant and pesticide-tolerant corn varieties were approved for use in 1998. Since then, 21 GM corn varieties have been approved for use in Argentina compared to eight soybean varieties. GM crop acreage is likely to expand in the country after Argentina and Monsanto settled their long-standing dispute over royalties in 2016.

Argentina’s and Brazil’s GMO policies run counter to those of many of their neighbors. Policy has stood in the way of widespread GMO adoption in most South American countries ever since the US, Argentina, Canada, China, Australia and Mexico became the first countries to approve GMO usage in 1996. Ecuador’s constitution explicitly prohibits their use and Peru implemented a 10-year moratorium beginning in 2012. Despite reluctance to adopt GMOs from some South American countries, the global export value of GM seed exceeding $314 million in 2016 demonstrates the importance of the biotechnology worldwide.

Brazil and Argentina, recognizing GMOs’ value, have continued to expand their acreage. Brazil planted 121.3 million acres of GM crops in 2016. Argentina planted 58.8 million acres, and trails only the US and Brazil for area planted to GM crops. Argentina first started planting GM soy with the introduction of Roundup (glyphosate) resistant soybeans in 1996. Now the third largest producer of GM crops worldwide after the US and Brazil, Argentina seems secure in its place as a major GM grain exporter.

There are trade barriers to GMO usage, and Argentine GM crops face considerable hurdles entering the European Union (EU) market. EU directives exist on the release of GMOs in the environment, the use of GM crops as food, traceability, and labeling. China, recognizing its need for cheap and abundant supplies of grain, welcomed GMO imports in 2017 and became the number one export market for Argentine corn.

Low corn prices have agribusiness worried

In an unintended consequence, the cumulative success of biotech has led to a global corn glut. 2017-ending stocks of corn in the US, Argentina, and Brazil were 62.9, 5.8, and 10.6 million tonnes, respectively.

Monsanto is an agribusiness firm that has revolutionized commercial agriculture through the development of pesticides, herbicides, and GM crops resistant to both Monsanto chemicals and naturally-occurring pests. As products like these show increasing success, farmers must embrace GM crops if they want to compete with farmers reaping greater yields through GM technology.

With corn prices hovering just above $3.50 per bushel, some farmers are choosing not to spend more on expensive, high-yielding GM seeds. Corn producers are no longer confident that they will recoup their costs. As market growth plateaus, agribusiness firms are struggling to provide value for farmers around the world.

In 2017, corn yields in Argentina were 8.37 tonnes per hectare compared to 11.08 tonnes per hectare in the US. Farms in emerging markets like Argentina could continue to turn to crops with greater profit potential such as soybeans. At 36.2 million hectares planted, Argentine soybeans fall just shy of corn with 36.42 million hectares planted in 2017.

Conclusion

Depressed corn prices in recent years have been worsened by high yields and an influx of investment into the sector. In turn, agribusiness giants like Monsanto, Dow, DuPont, Syngenta, ChemChina, Bayer, ADM, Bunge, and the Potash Corp of Saskatchewan grapple with the new norm of slim profit margins. The strategy of expanding into emerging markets may prove futile as resource-poor farmers shun better corn productivity for higher value crop markets like soybeans.

Chinese soybean demand for feed has proved to be a lucrative alternative to corn for Brazil and the US. Argentina has also been tempted by soybeans’ potential, but the country may be better served by sticking with corn. US corn production decreased in 2017, and corn acreage is being cut in favor of increased soybean acreage. US and Brazilian corn exports decreased while Argentine exports increased slightly in 2017.

Whether gravitating toward more corn acreage or shifting planted area to soybeans, Argentine farmers must make decisions under pressure while navigating domestic tariff policy and far-flung global developments. For instance, the precarious future of the Renewable Fuel Standard (RFS) in the US has global corn producers warily anticipating the next moves from the Trump Administration. Since the inception of the RFS in 2006, the need for ramped up corn production had global corn exporters scrambling to plant more acreage. The uncertain political environment within the US has ethanol production policy hanging in the balance. Hoping to get ahead of any major US developments, Argentina may want to quickly take advantage of any opportunity for increased corn exports. With the data and analysis that Gro provides, subscribers can maximize benefits in a world of thin margins between success and failure.