Grains production growth will outperform soybean over the next five years in Argentina due to the major policy shift from the new government led by Mauricio Macri . Argentina will strengthen its share of the export market in the grains and soybean segments over the next five years as a weak peso increases the country's competitiveness. Other sectors will strongly benefit from export opportunities, including beef and dairy products.
Sugar production growth from 2014/15 to 2019/20: 7.7% to 2.3mn tonnes. Sugar production will receive a boost from the combination of an increased domestic ethanol-blending mandate as well as increased competitiveness of Argentine sugar on the export market.
Soybean production growth from 2014/15 to 2019/20: -10.4% to 55.0mn tonnes. Farmers have been straining their fields in recent years by continually planting soybeans, which will add to the incentive to turn to other crops. With export taxes on corn and wheat now significantly reduced by the new government, this will amplify substitution away from soybeans.
Soybean consumption growth from 2014/15 to 2019/20: 13.1% to 50.mn tonnes. A key driver will be export demand for soybean oil (specifically from China) and soybean meal, which is an important livestock feed. The conversion from raw soybean to finished processed products is contributing to our consumption outlook.
Corn production growth from 2014/15 to 2019/20: 23.8% to 35.5mn tonnes. In line with Macri's reforms, corn's profitability has significantly improved, making the crop more attractive than soybean for Argentine farmers. Growing opportunities on the domestic and export markets will support strong output growth out to 2020.
2016 real GDP growth: -0.6% (down from an estimated 2.0% in 2015).
2016 consumer price inflation: 34.6% average (up from 26.7% in 2015).
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We have revised up our production forecasts for wheat and corn due to the major policy shift from the new government led by Macri. This will encourage farmers to shift away from soybean towards grains. Meanwhile, out to 2019/20, we forecast corn consumption to be largely driven by the livestock sector, particularly the poultry segment.
With export quotas for corn and wheat removed by the new government, soybeans will lose acreage to these crops. We hold a bearish view on soybean production in Argentina through to 2019/20. Domestic soybean consumption will remain strong due to demand from the processing sector, as Argentina is the world's largest exporter of soymeal and soy oil.
The beef sector will increasingly look to the export market for growth, as domestic consumption is already at a high base and the sector is poised to benefit from the more favourable policies put in place by the new government. Consequently, the pork and poultry sectors will expand on the back of growing domestic consumption.
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Argentina Agribusiness Report Q3 2016 - New Market Study Published
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