Argentina Driving Global Corn Market Into New Era
Production, Infrastructure Advances Cut Competitive Gap,
Keep Exports Going Year-Round
Years of fiscal reform and improvements in infrastructure have laid the groundwork for Argentina's emergence as a serious, year-round and global competitor in the corn market. Other exporters such as China and East Europe compete with the United States in regional corn markets but only Argentina can compete in all global markets. Furthermore recent production gains have made Argentina a consistent and reliable supplier for nearly 20 per cent of the world corn market.
Since 1989, the Government of Argentina's highly successful stabilization program has led to large inflows of foreign capital. The long neglected transportation and port sectors were among the major recipients of new investment funds. Results include a 20-25 percent decline in rail freight charges, expanding barge traffic on the Parana/Paranagua waterway from 2 million tons in 1992 to 14 million tons in 1997 and Panamax sized vessels calling on upriver ports. Other investment has led to increased loading rates and a tripling of grain storage capacity at major ports.
Now, growing grain handling capacity is being matched by rising grain output. Wheat production has increased from 8.4 million tons in 1989 to 14.3 million, while coarse grain production has jumped from 7.3 million tons to 21.2 million. More importantly, during the last seven years coarse grain yields have risen twenty-five percent, with wheat yields up twenty percent.
Higher and more stable yields are the direct result of expanded investment and input use by producers. Keys to increased investment have included a drastic reduction in the cost of credit and reduced price risk, thanks to rapidly expanding utilization of futures markets and on-farm storage facilities. Grain trading on the Buenos Aires futures exchange has risen to 14 million tons in 1997. On-farm storage capacity is still limited, but rapid expansion has cut the need for producers to market their crop at harvest-time.
Better quality and more effective transmission of market information have led to more stability in export pricing, with FOB quotes now closely linked to U.S. prices. With the Argentine economy in good condition, and excellent prospects for further production and grain handling improvements, Argentina will continue to solidify its position as the United Statess main competitor in the world corn market.
For more information on this topic, see the coarse grains section of this circular.
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