Argentine farmers see promising future in soybean crops
Alejandro Carafi takes long steps through his field of swaying wheat as he explains how he’ll cut it all down in the next week to make room for soybeans, what some in this farming community have dubbed “oro verde” — “green gold.”
The pressure is on for family farmers like Carafi and his wife, Agnes, to bounce back from a difficult year of dry weather and take advantage of new interest from Asia for their soybeans as the United States and China remain locked in a dramatic trade stand-off.
When U.S. President Donald Trump and Chinese President Xi Jinping meet Saturday in Buenos Aires at the G20 economic summit, Carafi and other families will be watching closely as the two leaders shake hands. They’ll analyze their smiles and eye movements. They’ll dissect facial expressions for any sign of a break in the stalemate.
Farmers here in Argentina have been insulated from the price cuts that have struck American producers in farm and factory states like Missouri who can no longer sell their beans to China - the world’s biggest soybean consumer.
But it’s a different challenge for farmers like the Cafris. The family, which has owned more than 4,200 acres of land for six generations, must establish a foothold for when the trade war ends.
The government is counting on them and other farmers to help pull the Argentine economy back into shape — and don’t lose the momentum that the U.S.-China trade war indirectly sparked.
Walking towards another field of recently planted soybeans, Carafi said he’d prefer to sell to two of the world’s biggest economies instead of just one.
“I would rather compete on the open market than get ahead with a closed market where prices are higher for one, but not the other,” he said, before grabbing a soy plant to check for insects. “That’s only helpful in the short term and bad in the long term.”
In the long run, Carafi and the Argentine government see the U.S.-China trade war as a net negative, as it could reduce global commerce and bludgeon the Chinese economy, dampening demand for Argentine exports, said Benjamin Gedan, who served as South America director on the National Security Council in the Obama administration and previously was responsible for Argentina policy at the State Department.
But, for now, the U.S. loss is Argentina’s gain, and Brazil’s, as China looks for new suppliers to fill its need for soy and other imported food.
Brazil and Argentina are the second and third biggest producers after the United States, and along with the U.S., account for the vast majority of soybeans produced around the world.
“The Trump administration is a friend to foreign farmers,” Gedan said. “U.S. protectionism, and the U.S. absence in new multilateral trade arrangements, is limiting access for U.S. farmers to large overseas markets.”
Brazil exported 50.9 million tons of soybeans to China from January to August, a 15 percent increase from the same period last year, according to the agriculture ministry. Meanwhile, Argentina has replaced China as the top buyer of U.S. beans.
Citing the increased demand from China, the Buenos Aires Grains Exchange projected Argentina soybean exports will grow 15.4 million tons in the 2018-19 harvest season.
That makes U.S. farmers like Blake Hurst nervous.
Hurst, a Missouri soybean farmer and president of the Missouri Farm Bureau, said he can’t blame Argentina and Brazil for taking advantage of opportunities. He’s thankful that Argentina is helping American farmers by purchasing U.S. soybeans that are then processed and sold to China.
But he’s also growing increasingly weary that the longer the trade war continues the greater harm it will cause. No matter what, U.S. farmers’ reputation as a supplier has been damaged, he said.
“Argentina is going to do everything they can to take that market,” Hurst said. “And if you’re China wouldn’t you want a more dependable suppler. Even if we come to some agreement, we’re still going to be the supplier of last resort because they don’t know when we’re going to do this again.”
It’s happened before.
Forty years ago, many Midwestern farmers were pushed out of the industry when President Jimmy Carter sought to punish the Soviet Union for invading Afghanistan and announced an embargo on grain sales to the Soviet Union.
While the U.S. cuts its own sales to the Soviet Union, countries like Argentina and Brazil seized on the opportunity and their own grain markets, which they sold to the Soviets to the detriment of American family farmers.
Domingo Iraeta, an Argentine soybean and corn farmer in Daireaux, Argentina, insists there is enough demand in the world for both the United States and Argentina.
He argues working together, American and Argentine farmers, to expand trade, they could actually increase opportunities for farmers in both countries.
He follows several American farmers on Instagram drawing tips and advice from posts about harvesting and new technologies that he could use to improve his own production.
“We need each other. I need John Deere. I need the Iphone,” he said, pointing at his phone directing him to a nearby field. “You need our agriculture. You need our wine and our tourism.”
While some diplomatic observers speculate Trump and Xi will reach some kind of agreement to settle international markets, White House officials have tamped down high hopes.
The two sides can’t seem to trust each other, according to Peter Navarro, the Trump trade adviser.
“How do you have a deal with somebody if they won’t even acknowledge your concern?” Navarro in a speech at the Center for Strategic and International Studies. “I mean, it’s Alice in Wonderland.”
Luis Zubizarreta, president of Argentina’s ACSOJA soy industry chamber that represents farmers, exporters and seed companies, said circumstances could change any minute and the Argentine industry must be ready.
It’s critical and not just for local farmers, but for the Argentine economy. Agriculture is the economy’s main engine, and prices for soy and other commodities can lift or derail the country’s economic progress.
Soybeans are expected to be a big part of Argentine President Mauricio Macri’s agenda at the G20.
He is expected to push Xi for a new export deal that would allow Argentina to export, not just raw beans, but also crushed soymeal and soy oils.
Now that Argentina is buying U.S. soybeans, Macri is expected to push Trump to reopen a once lucrative trade market for biodiesel imports made from Argentine soy oil.
Argentina provided roughly two-thirds of U.S. foreign imports of biodiesel before the administration issued imposed sanctions over anti-dumping allegations.
“We need to reopen the market,” Zubizarrerta said. “It’s a good potential for the American consumer. It’s very important for us and also for the States to have a reasonable and friendly agreement.”
The drive to Agnes Carafi’s brick ranch house is lined with gigantic calypso trees planted by her grandfather that drape over the dirt road. She says farmers are patient. They have faith that what they plant today will grow in six months or a year.
That’s why, she says, she worries less about one meeting between Trump and Xi’s.
She’s more focused on the visiting 20 presidents from the most powerful countries. They’ll be focused on Argentina like rarely before.
“We need think long term, not short term,” she said, standing in a field of soybeans. “We want to open the gates so the world can see what we have to offer.”