Export controls last year in Argentina left wheat farmers with no one to sell to except for the handful of big mills inside Argentina ...ones that coincidentally had cozy relations with policy makers.
I predicted that those farmers would not plant wheat again this year ...I was wrong. Well, wheat farmers are wheat farmers, and they know their special place in the world and its daily bread.
Well, guess what? They got screwed again. They are right back in the same position as last year ...too much wheat inside Argentina chasing too few buyers ...and no way to export it to their traditional cash customers.
All that destructive effort toward keeping the price of bread down until election day. My advice to the wheat farmers here is not original, "Raise less wheat ...and more hell!"
Agriculture has a different cycle from the election cycle, however ...and come election day, the damage will have already been done. And once the politicos have either won or lost (either way, doesn´t matter), they´ll have to deal with the reality then ...not now. But the problem will be much more intractable later.
My newest prediction is that the trigueros (wheat farmers) will not plant wheat again. They will plant stupid fucking soy beans ...because even the 35% tax on it is better than being resticted from export ...because no one eats soy here, unlike wheat for bread.
So much for preventing the "soyasation" of Argentina.
The combination of wheat farmers not being able to find customers on the internal-market at world-market prices for their world market produce ...and being stuck with a select few flour mills in Argentina that don´t need that much wheat and can pick-and-choose the wheat farmers they buy from them ...and who drive the price down to less than what the farmer spent to produce it ...if, indeed, wheat farmers can find a price even THAT high ...will drive wheat producers from one the world´s great wheat producing countries.
It´s not a laughing matter; if Argentina withdraws from the world of wheat growers by any significant percentage, every person on earth will feel it ...even more so in developing countries like Egypt and others where riots over wheat occured not too long ago.
Don´t get me wrong ...I´m a socialist by nature and nurture ...and a farmer and a rancher. I am as proud to produce beef and grain for the national good as much as any guy from any graphic of a Soviet Poster...
...but the policies that wheat farmers are struggling under here in Argentina will hurt every bread eater in the world, both in the short and the long run.
Argentina has already left the beef business ...it will now leave the wheat business, to my mind.
I have always felt proud, especially as an immigrant to this great nation of immigrants, to supply the national dish, beef, to the asados of every economic group ...even at prices lower than our cost of production.
My missus said it first ...we would be ecstatic to give-away 1/2 of all our animals to the government for redistribution as they see fit ...if only we could sell the other half on the world market .
Think about that for a moment ...then call us oligarchas, if you wish. One-half of every rancher´s production would have been enough to supply Argentina and the world ...the other half could have kept the Argentine beef industry healthy.
Now, the export restrictions on beef have driven all of our neighbors out of the business. No mandates will cause them to re-enter the business, nor cause calves to be born to mothers that don´t exist. Argentina has exited the world market for beef ...and could very well not even be able to satisfy internal demand.
To me, wheat is even more important. Both vegans and carnivores depend on it. Brazil, our neighbor and historical customer for wheat, depended on Argentina for all of its bread wheat (wheat does not grow well in the tropics.) Brazil will now buys wheat with euros ...and wheat that is not as good as from Argentina.
Argentine farmers and ranchers SHOULD supply Argentine demand first, in my opinion, even at a loss, if need be. To me, it makes no sense to export everything just because one country´s currency is, currently, stronger than ours.
However, beggaring Argentine wheat and beef producers to satisfy political contributors farther up the food-chain, toward the short-term goal of keeping bread and circuses going until election day, hurts us domestically and internationally in that no international buyers will trust the great breadbasket of Argentina to fulfill orders in the future.
Ranchers and wheat farmers are not investing their own money back into production. We buy pick-up trucks and apartments that we don´t need nor want ...but it seems more sound than our own, traditional, business.
That will continue. We will shrink from our well-earned place among the great breadbaskets of the world ...until no one takes us seriously anymore.
Even if policies change, we agro-types will struggle against our loss of markets even as we struggle against the weather and prices as we always have. It will be a long way back ...if at all.
What hides behind worthy but faux-socialist goals of keeping food affordable ...is really the short-term keeping of prices of basic staples low to forego any unrest against the powers that be ...and as you´ve seen lately in the shops and markets, it´s not even bringing benefits to the consumer in the form of low food prices.
After the election, the chips will fall where they may. Office holders will have won or lost ...and the devil will take the hindmost, the producers ...and the consumers once they let go of the rope that has restrained the income of producers who needed that money to keep their operations going ...and their confidence going when it was time to make some big outlays into their fields and herds.
Ironically, if farmers and ranchers are left to their own devices, they (we) inevitably will produce more than the world can consume. If left to the brutality of the market, and our own hubris, we eventually produce more than is good for ourselves ...but is very good for consumer prices.
What we are seeing today in La República is not socialism ...but a last-gasp effort to keep beef and bread prices low ...until the current administration either wins or loses. What happens after that can either take the form of a policy reversal ...or be left for the next guy. In either case, it cannot continue.
It apparently is of no concern if the capacity of Argentina to produce beef and wheat, during a time in which the world needs it most, is damaged beyond decades of repair.
There are only a few great "breadbaskets" of the world. To drive the producers of one of them out-of-business should be looked upon as a crying shame.
I hope you´ll think about that tonight at dinner.
(Full Disclosure: my missus and I do not raise wheat, nor have we ever, nor will we ever.)
2 comments:
excellent post as always Mike
Thanks, Tom.
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