South America Calling

Argentina has for the last seven or eight years been at the vanguard of corporate farming.

Across the Pampas, companies like Los Grobo and Cresud rented huge swaths of farmland, while farm management companies popped up everywhere, running large farms for pools of landowners and investors.

It was a new model, borne of the lack of capital to buy land and driven by a belief that corporate management teams, utilizing top-end technology, superior administration and economies of scale, can wring much greater returns from soybeans and cereals than lowly owner occupiers.

Next season, however, everything will be turned on its head for the simple reason that many corporations and pools don't see how they can make any money with the model.

Margins on Argentine grain farming have tightened dramatically during the last couple of years due to the rising cost of inputs and services. Runaway inflation, foreign exchange controls and rising taxes are perhaps the three most important reasons for the rise.

Land rents have fallen about 15% this year, but that's nothing like enough to offset cost inflation elsewhere.

As a result, many corporate farms and management companies are not renewing rental contracts, according to a very good article in La Nacion, a local Argentine daily.

That's a big deal as 60% of Argentina's farmland was rented last year.

As a result, many farmers who have not tended their land for up to a decade will be planting again in the 2013-14 season, which has just started.

AFTER YEARS OF BIGGER IS BETTER, SMALLER STAGES A COMEBACK

For while managed farms have seen an explosion in administration costs, be it in personnel, office space or accounting, family-run farms simply don't have these costs and therefore have a better chance of making money, Juan Sebastian Pizzi, consultant for the CREA farm group in southern Santa Fe province, told La Nacion.

Farmers who own between 1,500 and 3,700 acres are in the best position to plant this year.

Given such a hostile planting climate, the new farmers are unlikely to take any risks in the upcoming season and in Argentina that means planting soybeans.

As a result, soybean area will probably rise from the 48 million acres planted last year, while corn area will slide slightly when planting begins this week.

Alastair Stewart can be reached at Alastair.stewart@telventdtn.com

Argentina has for the last seven or eight years been at the vanguard of corporate farming.

Across the Pampas, companies like Los Grobo and Cresud rented huge swaths of farmland, while farm management companies popped up everywhere, running large farms for pools of landowners and investors.

It was a new model, borne of the lack of capital to buy land and driven by a belief that corporate management teams, utilizing top-end technology, superior administration and economies of scale, can wring much greater returns from soybeans and cereals than lowly owner occupiers.

Next season, however, everything will be turned on its head for the simple reason that many corporations and pools don't see how they can make any money with the model.

Margins on Argentine grain farming have tightened dramatically during the last couple of years due to the rising cost of inputs and services. Runaway inflation, foreign exchange controls and rising taxes are perhaps the three most important reasons for the rise.

Land rents have fallen about 15% this year, but that's nothing like enough to offset cost inflation elsewhere.

As a result, many corporate farms and management companies are not renewing rental contracts, according to a very good article in La Nacion, a local Argentine daily.

That's a big deal as 60% of Argentina's farmland was rented last year.

As a result, many farmers who have not tended their land for up to a decade will be planting again in the 2013-14 season, which has just started.

AFTER YEARS OF BIGGER IS BETTER, SMALLER STAGES A COMEBACK

For while managed farms have seen an explosion in administration costs, be it in personnel, office space or accounting, family-run farms simply don't have these costs and therefore have a better chance of making money, Juan Sebastian Pizzi, consultant for the CREA farm group in southern Santa Fe province, told La Nacion.

Farmers who own between 1,500 and 3,700 acres are in the best position to plant this year.

Given such a hostile planting climate, the new farmers are unlikely to take any risks in the upcoming season and in Argentina that means planting soybeans.

As a result, soybean area will probably rise from the 48 million acres planted last year, while corn area will slide slightly when planting begins this week.

Alastair Stewart can be reached at Alastair.stewart@telventdtn.com

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