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Latin America: Think Beyond ‘Just Brazil’

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Some key Latin American crops include coffee, corn, rice and sugarcane.

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Latin America’s role in agriculture is growing steadily

It’s easy to see why Brazil has become the poster child for Latin American agriculture among U.S. farmers and traders. Its land mass is slightly smaller than that of the U.S., yet agriculture contributes 6% to GDP compared to the 1% farming contributes to GDP in the U.S. It boasts ample grain and livestock production.

Yet focusing solely on Brazil misses the bigger picture that additional countries south of the U.S. border including Mexico, Argentina and Colombia are gaining a foothold in the international ag marketplace.

Farmers in the U.S. might find business opportunities by learning from Latin American neighbors.

“In Latin America, we’ve seen some of these countries emerge as ag exporters,” explains Pablo Sherwell, head of food and agribusiness research and advisory for Rabobank in North America. “In Mexico, fruit-and-vegetable farmers are highly sophisticated and highly integrated with the U.S. in terms of technology but also management and the way they do business.”

That doesn’t mean challenges are absent. President Donald Trump has discussed tearing up or renegotiating existing trade deals. In Mexico, agriculture is increasingly bifurcated. Some farms are highly sophisticated and global, while others are low-scale and only reach local markets, says Sherwell, a Mexico native.

One factor that has assisted the expansion of those high-end operations has been NAFTA and other trade agreements now in review.

“Between 1993 and 2015, the total value of [NAFTA] trade expanded from $16.7 billion to $84.5 billion, an increase of 232% when inflation is taken into account,” says Steven Zahniser, an ag economist at USDA’s Economic Research Service (ERS). “Over this period, U.S. agricultural exports to Mexico increased from $3.6 billion to $17.7 billion, while corresponding imports from Mexico expanded from $2.7 billion to $21.0 billion.”

Argentina Accelerates. Like Mexico, Argentina is a country with a diverse footprint in agriculture. The country transitioned to a new presidential administration at the end of 2015, which has helped build its influence abroad, says Alejandra Sarquis, research manager for origination and trading at Molinos Agro S.A. in Buenos Aires.

“Those announcements gave farmers a better perspective about medium- and long-term projections,” Sarquis says, “making it easier to plan crop rotations and diversification, reincorporate technologies and keep aligned with world standards for agrochemical use.”

The shift in regulations suggests a return to the global marketplace.

“The new policies center on the elimination and/or removal of exports taxes on the country’s principal agricultural commodities, macroeconomic stabilization and more market-oriented policies,” adds Constanza Valdes, a research economist with ERS. “These reforms represent a reversal of trade protection, managed exchange rates and capital controls policies that have hobbled the farm sector for the past 15 years.”

If existing government policies continue, Argentine farmers will plant more cereal grains and oilseeds over the next decade, projections show. By 2025, the country will produce between 65 million tons and 73 million tons of soybeans, Sarquis says. That’s up from 57 million tons USDA projects for 2016/17. It is set to produce between 45 million and 55 million tons of corn by 2025, up from 2016/17 estimates of 36.5 million.

Colombia Connection. Far to the north of Argentina, the country of Colombia is witnessing an economic shift led in part by agriculture, Valdes says. Key crops include coffee, corn, rice and sugarcane.

“Colombia’s agricultural sector is at a turning point because of a convergence of several positive factors, including the U.S.-Colombia Trade Promotion Agreement (TPA), the ongoing efforts to improve the competitiveness of Colombian agriculture and the prospect of a peace agreement with long-standing guerrilla groups,” Valdes explains. That should spur ag exports and imports despite an environment of low commodity prices and Colombian peso depreciation.

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Top Ag Trends in Latin America

Producers in the U.S. should pay attention to several trends shaping agriculture in Latin America, says Constanza Valdes, a research economist with USDA’s Economic Research Service.

  • Continuous expansion of arable cropland
  • Increased use of technology and increased yields
  • New forms of financing
  • Increased competitiveness in corn, soybeans, wheat, ethanol and sugar production
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