The field closes a year with ups and downs and renewed expectations for 2025

The Argentine agricultural sector experienced a recovery this year in terms of productionespecially after the drought that affected the country in 2023. However, this productive improvement was accompanied by the economic challenges of local politics and the tensions that were generated in the profitability of companies in the primary and industrial sector.

The arrival of Javier Milei to power and his promotion of austerity policies contributed to reducing inflation and stabilizing state finances, but they had a negative impact on several economic sectors where probably the most visible thing was the fall of the domestic market.

The rains were the main protagonists this year and took away the producer’s biggest concern, that of the need for water for the development of the crops. When this happens, in agriculture all eyes focus on the expected profitability, where costs and sales prices are decisive. Only one of these two variables can be worked on, that of internal costs. However, the course defined by Milei – which does not include either devaluation or, for the moment, reduction of withholdings – allows us to assume that it will be necessary to be a great strategist to find profitability in this campaign.

For agriculture, 2024 was a year of contrasts, because although a recovery was evident in agricultural production, companies in the sector face significant economic challenges that were generated from the beginning of a stage of correction of economic imbalances. This, added to the drop in international raw material prices, forced us to focus on the profitability of agricultural companies.

To give greater clarity about the imbalances, it is worth mentioning, for example, what happened at the end of 2023, when it was known that the dollar was going to go from $300 to $1000, so everyone filled their deposits with supplies. That is why this year was very hard in terms of sales, not only because of the lack of rain – the main incentive to apply technology and seek high yields – but also because everyone was left with “expensive” stocks because international prices of chemicals fell sharply during this year. Many bought pesos in December 2023 to mitigate the increase in the dollar, but they were left with an expensive product. On the companies’ side, stocks are being recomposed with a much more expensive dollar and less sales. This “inheritance” did complicate the outlook for companies in the sector, especially for chemical inputs.

The end of financial speculation

Eduardo Pérez, commercial director of Biotrop in Argentina and a leader with enormous experience in the input sector, he assured in dialogue with Scope that “For the agricultural sector it was a very difficult year”. What happened was that the dynamic to which previous governments had forced and accustomed the agricultural producer to ended.

According to Perez, “the financial issue is over, speculating with inflation is over, a lot of things are over and that is very good, but from an economic point of view the field is reaching a limit. The Government sees this clearly and I believe that it is working to find a solution. There are problems, but I have a very optimistic vision going forward. If we were talking about this two years ago I told you that I didn’t know where we were going to end up, but today we believe that we know where it is going to end and it is going to end well.”

Getting out of the financial world forces producers to be very efficient productively and agronomically. “Now the head of the producer, as he no longer has the financial tool, is focused on producing more: He who previously produced 3,000 kilos of soybeans will have to produce 3,500 to live, he who produced 4,000 kilos of wheat will have to produce 5,000 and that is what will happen. The government will have to move forward in reducing withholdings so that there is more profitability and bank credit also has to appear, which is essential, because until now to a large extent all of this was financed from the producer or from the companies themselves.”

Another sector where credit is the protagonist is agricultural machinery. To delve deeper into this area, Ámbito consulted Eduardo Borri, president of Metalfor and former head of the Argentine Chamber of Agricultural Machinery Manufacturers (CAFMA), who assured that “2024 exceeded his expectations. Although it began with uncertainty due to the new political and economic scenario, the rains arrived, the longest drought in decades ended and sales began to significantly increase. In the first quarter with strong own financing and from the second quarter onwards with the credit offer from the banks. Thus, sales close 50% above those of 2023.

As we mentioned, it was a year of contrasts. According to Borri, this year a marked difference between the leading companies and the rest was consolidated, as in the previous year.: when the former sustained their sales and, like us, showed great recovery, the latter continued to suffer the consequences of a market marked by drought and lack of credit. Probably, having the necessary size as a company and the robustness of being able to finance clients made a substantial difference. For next year, we understand that the weather conditions will be optimal, that long-term bank loans with reasonable rates will continue and we hope that the last push will come from the government with some favorable signal for the sector.

Hope is the last thing to lose

Claims to the Government for a reduction in withholdings come from all sectors: unions, businesses and of course from the producers themselves. The fact is that many close the year with a strong crossroads, since they must define investments that are sustained by profitability. This lack of profitability is what until now has caused Argentina to remain stagnant in terms of productivity (widely surpassed by the rest of the countries in the region) but could now condemn the producers who survived a long period of droughts and economic exercises. tight.

This could improve if the Government manages to make progress in reducing export duties. For now, the field remains confident, as indicated by the latest report titled Ag Barometer, prepared by the Center for Agribusiness and Food of the Austral University. The study shows that 60% of producers think that, one year after taking office, they met the expectations placed on their management. But the contrast is still latent: 36% believe that they were not covered and claim, in particular, that export duties were not lowered.