Once again, the Argentine agro-industrial sector is demonstrating its characteristics as an essential driving force for the sustainability of our economy as a whole.

Argentine exports derived from agricultural and livestock products continue to grow, and although the other complexes have reduced their sales abroad, total exports for 2021 are projected at a historical value of 67/68 billion USDThis demonstrates how important the sector is as a generator of foreign currency.

In the first 5 months of 2021, accrued exports reached 15,4 billion USD, while in the same period of 2020 they had registered about 11,5 billion (INDEC). For its part, the BCRA reports that in the same period, 16,1 billion USD entered its coffers from export collections, about 8,3 billion more than what was registered last year for the same period (BCRA).

The report accompanying this note presents a complete overview of the agricultural sector for the 2020/2021 campaign. The current situation in both local and international markets will be analyzed. It is structured with the following points:

• Grains: corn, soybeans, sunflowers, grain sorghum, wheat and barley. We delve into the markets for the main grains: soybeans, corn and wheat.
• Dairy products: local production, prices, domestic consumption and exports.
• Meat: bovine, poultry and porcine. Meat consumption and exports.

Grain

Grain production in Argentina rounded off 140,5 MTn for 2020 / 21 campaign, almost the same level of production reached in the previous campaign, but with a different composition. The changes in land use continue with the trend of the last campaigns, with an increasing proportion of soybean and corn crops being late (2nd season). Adding to this factor, the persistent lack of water, lower crop yields are observed in the last two campaigns.

The area planted with corn has increased the most in recent years, while the area planted with soybeans, after reaching a peak in the 2016/17 campaign, has been decreasing. There is also an increase in the area used to plant wheat, which goes hand in hand with the use of late summer crops.

La 2020 / 21 campaign recorded a new production record CORN, reaching the 60,5 MTn. On the other hand, the production of PROCESSING marked one of the lowest levels of the last decade, 46 MTn. The drought severely affected the yields of the WHEAT, in the same period. For the campaign that closed, one of the lowest production levels of recent years was recorded, averaging 1,000 tons. 17,6 MTn.

The 2021/22 campaign has already started with the sowing of winter crops. A slight increase in the area sown with WHEAT (+200 thousand ha) and also BARLEY is expected.

With an international context still uncertain due to the emergence of new variants of the COVID-19 virus, interest rates remain low and agricultural product prices are at their highest levels in recent years. A slower recovery of the global economy is projected, but sustained demand for agricultural products is expected.

In turn, inclement weather, both in the north and south, reduced expected yields and supply projections. Available stocks are among the lowest in recent years. Therefore, although there has been a lot of volatility in the markets in recent months, prices of the main grains are expected to remain stable for the remainder of 2021 and early 2022.

Dairy

Regarding dairy production, for the period January-May 2021, an increase in production of around 4,3% was recorded compared to the same period last year. An increasing trend has been observed in the last three campaigns.

In these first six months of 2021, producer prices rose more than inflation, driven by improving domestic demand and growing external demand. In real terms, the price of a liter of milk for producers is reaching its highest levels in the last 5 years, recovering from a consecutive year and a half of decline. In addition, the ratio of input/output per kg of corn per liter of milk also shows an improvement in this first half of the year.

Per capita dairy consumption increased last year compared to 2019 by 1,5%, reaching 185 lts. equivalent. However, this indicator has been on a downward trend for the last 6 years, and its current value is well below the 218,5 litres/inhab. consumed in 2015.

Dairy exports continue to increase. Although they had already doubled last year, between January and May 2021, 18,5% more milk powder and 28% more cheese were exported compared to the same period in 2020.

Meat

Beef production has shown increases in recent years. However, the increases observed in poultry and pork production also show much higher rates.

The demand for Argentine beef exports has increased exponentially, driven primarily by China. This demand from the Asian country has led to an improvement in the complementarity of the destination markets for the different cuts and types of beef.

Although the increases in beef production were sustained, in the last two campaigns there was a tendency to "liquidate bellies" and a decrease in the herd. By 2020, it would be around 53,5 million headThis trend showed signs of reversing in the first half of this year.

However, the government's decision to close meat exports at the end of May will undoubtedly affect current decisions and bring future consequences for the entire sector.

The total amount of meat consumed per inhabitant remains stable, around 110 kg/yearHowever, beef consumption has been declining, while pork and poultry consumption has increased. This is mainly due to what is known in microeconomics as the “substitution” and “income” effects.

The first is due to the increase in relative prices of beef compared to other meats. Compared to July 2020, beef became 15,7% more expensive for consumers compared to poultry meat and 18,4% more expensive than pork. The second is due to the decrease in real household incomes. Since the third quarter of 2017, real incomes have been falling and the pandemic has deepened the trend (Tessmer, 2020).