The Argentine Grain System

Chapter 1

The Argentine Grain System

CONTENTSPage

Overview of Grain Production and Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Corn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................ 3Soybeans and Soybean Meal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

The Argentine Grain Industry ...,..,..,., . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Production and Marketing Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Marketing Channels and Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Organization of the Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Marketing Practices and Pricing Strategies of Producers . . . . . . . . . . . 16Government Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 17

Quality Control in Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Grades for Corn, Soybeans, and Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Quality Control Through Genetics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Evaluation of Quality in Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Incentives for Quality in the Argentine System . . . . . . . . . . . . . . . . . . . . . . . 21

Findings and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

FiguresFigure No. Page

1-1.1-2.1-3.

1-4,

1-5.

1-6.

Grain Production Areas in Argentina..... . . . . . . . . . . . . . . . . . . . . . 4World Corn Exporters’ Market Shares ....... . . . . . . . . . . . . . . . . . . . . . 6U.S. and Argentine Production and Export of Soybeansas a Share of World Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Volume of Soybeans Processed as a Percent of Total DomesticSupplies: United States and Argentina ...... . . . . . . . . . . . . . . . . . . . . . 8Market Shares of World Soybean Meal Exports: United States andArgentina. .,... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Market Shares of World Wheat Exports, United States and Argentina , 11

TablesT a b l e N o . P a g e

l-1. Production and Utilization of Corn in Argentina, 1964-88 . . . . . . . . . . . . 51-2.1-3.

1-4.1-5.1-6.1-7.1-81-9

Major Destinations of Argentine Corn Exports, 1975/76-85 . . . . . . . . . . . 5U.S. and Argentine Exports of Soybeans as a Share of RespectiveDomestic Supplies, 1965/87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Major Destinations of Argentine Soybean Exports, 1975/76-85/87 .. 9U.S. and Argentine Production and Export of Wheat, 1970-87 . . . . . . . . 11Major Destinations of Argentine Wheat Exports, 1975/76-85/86 . . . . . . . . 12Argentine Standards for Corn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Argentine Standards for Soybeans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Argentine Standards for Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Chapter 1

The Argentine Grain System

Argentina competes with the United Statesin many of the same world markets for corn,wheat, and soybeans. The country is a majorproducer of feedgrains and oilseeds as well asa large consumer of these grains and processedproducts. The relative position of Argentina ininternational markets has changed over the past20 years, as has that of the United States. Ingeneral these changes have resulted in a weak-ening of the U.S. position. *

*This chapter draws on the OTA paper “A Comparison of Qual-ity Factors of the Argentine and United States Grain Systems, ”based on findings of an OTA study team consisting of Dr. LowellD. Hill, Mr. Thomas E. Weidner, Mr. Robert A. Zortman, Dr.Michael J. Phillips, and Dr. James G. McGrann (interpreter) thattraveled to Argentina in 1987. Dr. Hill integrated the findingsof the team into the OTA paper.

Argentina is the only major competitor of theUnited States in exports of corn, wheat, andsoybeans. Most other countries compete withthe United States in only one grain, i.e., Brazil—soybeans, Canada—wheat. Argentina has alonghistory in producing and exporting corn andwheat that began at the turn of this century andhas been a significant exporter of soybeanssince the late 1970s.

Corn, wheat, and soybeans are grown in therich, dark soils located in the eastern part ofthe country (figure l-l). The provinces ofBuenos Aires, Santa Fe, and Cordoba are themain grain production areas.

OVERVIEW OF GRAIN PRODUCTION AND MARKETS

Corn

Corn production in Argentina is concentratedin a relatively small proportion of the total geo-graphical area because of climate, topography,and soil conditions. The Corn Belt consists offive provinces: Buenos Aires, Santa Fe, Cor-doba, La Pampa, and Entre Rios (figure 1-1).Most of the corn, however, is produced in theBuenos Aires and Santa Fe provinces.

Argentina has had no significant trends inproduction of corn but has experienced wideannual fluctuations due to weather. A record9.92 million metric tons (MMT) in 1970 wasfollowed by a 5.85 MMT crop in 1971 (tablel-l). With such wide swings in production, ex-ports as a percent of total usage also varied,from 34 percent in 1971 to 71 percent in 1980.Domestic feed use shows a steady increase. In-dustrial use of corn in Argentina (domesticother in table l-l) grew from 0.5 MMT in 1964to 1.7 MMT in 1973, and then declined to 0.9MMT in 1986. The primary user is the wet-milling industry.

World market shares show the United Statesgaining relative to Argentina during the 1970s.The two exporters share the same trading part-ners, especially Western Europe, the U. S. S. R.,and Mexico. Following the crop year of 1980/81,the United States lost market share relative toother exporting nations. Argentina continuedto keep approximately 9 percent of the worldmarket (figure 1-2).

The destination of Argentine corn exports hasshifted over time in response to economic in-centives and Government policies affecting in-ternational trade. In 1973/74, Italy and Spainreceived two-thirds of the maize exported fromArgentina (table 1-2). The Netherlands, theUnited Kingdom, China, and the U.S.S.R. werealso important destinations then, albeit at con-siderably lower levels.

Major shifts in destinations occurred between1973/74 and 1974/75. The percentage going tothe U.S.S.R. increased, Mexico entered themarket, and China purchased 473,000 tons ofArgentine grain. Over the next 2 years the share

3

4

Figure 1-1.—Growing Regions of Argentina: Wheat, Soybeans, Corn

C. Corn

● Each dot represents 500,000 metric tons,

SOURCE: Adapted from U.S. Department of Agriculture, Major World Crop Areas

going to the U. S. S. R., Mexico, and Chinadropped, while Spain increased its share, re-ceiving more than one-fourth of Argentina’smaize exports in 1976/77.

From 1974/75 to 1979/80 there was a generaldownturn in the share of Argentine maize de-livered to Mexico, Spain, and Italy. The Ital-ian preference for Argentine La Plata maize ap-

and Climatic Profiles, Agriculture Handbook 884, 1987

peared to be weakening throughout this period,as evidenced by their declining share. The ma-jor exception was in 1975/76, when Italy main-tained purchases of 1.5 MMT in the face of amajor decline in Argentine exports. In contrast,the U.S.S.R. share grew erratically, fluctuatingfrom a low of 4 percent in 1976/77 to 61 per-cent in 1979/80. The rapid growth of the So-viet share in the late 1970s prepared the stage

5

Table 1-1. —Production and Utilization of Corn in Argentina, 1964.88 (in 1,000 MT)a

Local Areamarketing harvested Yield Beginning Imports Total Domestic Domestic Total Endingyear (1,000 ha) (MT/ha) Production stocks (1,000 MT) supply Exports feed other usage stocks

1965/66 . . . . . .1966/67 . . . . . .1967/68 . . . . . .1968/69 . . . . . .1969/70 . . . . . .1970/71 . . . . . .1971/72 . . . . . .1972/73 . . . . . .1973/74 . . . . . .1974/75 . . . . . .1975/76 . . . . . .1976/77 . . . . . .1977/78 . . . . . .1978/79 . . . . . .1979/80 . . . . . .1980/81 . . . . . .1981/82 . . . . . .1982183 . . . . . .1983/84 . . . . . .1984/85 . . . . . .1985/86 . . . . . .1986/87 . . . . . .1987188 . . . . . .

3,0623,2743,4503,3783,5564,0174,0663,1473,5653,4863,0702,7662,5322,6602,8992,4903,3943,1702,9703,0253,3503,3512,900

16.821.523.219.419.323.324.418.625.228.424.121.132.836.531.025.738.030.330.330.434.337.031.9

5,1447,0398,0046,5536,8639,3609,9215,8538,9849,9007,3995,8368,3059,7098,9876,399

12,8979,6058,9999,196

11,49112,4009,250

24291740131221

690524550436761515183434173108210545289

91390823

01010011000000000000000

5,1687,0698,0216,5956,8769,3719,9436,5459,508

10,4507,8346,5978,8209,8929,4216,572

13,0059,8159,5449,485

11,58212,79010,073

2,7074,0104,1533,4483,7405,5106,4362,0405,0665,3993,5173,2385,2315,9165,9653,4179,0985,7656,0565,4487,1267,3674,000

1,9312,5593,2702,4662,3812,9572,2853,5942,7812,9542,4772,5633,1013,2503,0502,8003,4003,2002,9003,6503,4754,3003,700

501483558668743883532387

1,1111,6611,420

281305292233247297305299296591300900

5,1397,0527,9816,5826,8649,3509,2536,0218,958

10,0147,4146,0828,6379,4589,2486,464

12,7959,2709,2559,394

11,19211,9678,600

291740131221

690524550436420515183434173108210545289

91390823

1,473SOURCE U S Department of Agriculture, Foreign Agriculture Service, Foreign Agriculture Circu/ar—Grains/kVoM Gratn Sftuation and Outlook, Washington, DC, vari.

ous issues Reference tables for Wheat, Corn, and Total Coarse grains.

Table l-2.—Major Destinations of Argentine Corn Exports, 1975/76-85 (in 1,000 MT/percent of total in parentheses)

TotalUnited Argentine

Year Italy Spain U.S.S.R. Netherlands Kingdom Mexico China exports1973/74 . . . . . . . . . . . .

1974/75 . . . . . . . . . . . .

1975/76 . . . . . . . . . . . .

1976/77 . . . . . . . . . . . .

1977/78 . . . . . . . . . . . .

1978/79 . . . . . . . . . . . .

1979/80 . . . . . . . . . . . .

1980 1, , , ., . . . . . . . . .

1981 . . . . . . . . . . . . . .

1982 . . . . . . . . . . . . . .

1983 . . . . . . . . . . . . . .

1984 . . . . . . . . . . . . . .

1985 . . . . . . . . . . . . . .

2,772(54.2)2,056(35.3)1,520(58.6)1,893(43.2)1,381(23.0)1,838(27.6)

709(1 7.5)

328(9.3)300

(3.3)

(4.4)395

(6.1)335

(6.0)502

(7.1)

600(11.7)

556(9.5)225(8.7)

1,109(25.3)1,069(17.8)1,573(23.6)

314(7.7)

(0.4)225

(2.5)

(7.6)697

(10.8)

(10.6)956.4(13.6)

246(4.8)

1,148(19.7)

213(8.2)184

(4.2)1,608(26.8)1,387(20,8)2,461(60.6)2,965(84.1)7,989(87.7)3,301(63.3)2,002(30.9)1,090(19.6)

2,038.7(29.0)

115(2.3)

(1.0)

(2.6)126

(2.9)142

(2.4)147

(2.2)

(1.4)

(2.10)

(1.1)

(1.8)102

(1.6)

(1.1)107.4(1.5)

120(2.30)

(0.09)

(,041133

(3.00)

(1.60)53

(.80)21

(0.02)723

(12.40)289

(1 1.10)

(0.60)

(0.80)

(0.30)

252(4.9)473

(8.1)

5,111

5,831

2,595

4,384

5,997

6,664

4,060

3,525

9,112

5,214

6,477

5,558

3,238.27,040.8

Dashes volume less than 1,000 MT,a1980-85 reporting period has been shifted to a calendar Year

SOURCE: 1973/74-1979/80 data from US. Department of Agriculture, Foreign Agriculture Service, Grain Exports by Selected Reporters, Foreign Agriculture Circulars,1978 and 1982, Washington, DC Data for 1980-85 are from Secretary of State, Agriculture, Livestock and Fishery, unpublished data, 1985, Buenos Aires, Esti-mates vary by source So do the time periods used for crop years, marketing years, and calendar years, No consistent sources were found that covered theentire period

6

70

60

20

10

0

Figure 1-2.-World Corn Exporters’ Market Shares (includes Intro EC ● nd bloc trade)

— U n i t e d S t a t e s- - - - - Argentina

I I I I I---- ----

1960 1963 1966 1969 1972 1975 1978 1981 1984 1986

SOURCE: U S Dqxutment of Agriculture, Fonsign AgncultursI Service, Foreign Agriculture Circulsfs, vsrious issues

for the near Soviet dominance of Argentine ex-ports in the early 1980s.

In late 1980 and early 1981, political eventsdramatically altered the destinations of Argen-tine maize exports. After the 1980 invasion ofAfghanistan by the U. S. S. R., the United Statessuspended U.S. grain sales to that country. Con-sequently, Argentine shipments to the U.S.S.R.increased to 84 percent of the exports in 1980/81and then 88 percent in 1981/82.

Shipments to the United Kingdom had beengenerally declining since 1973/74 and droppedto zero in calendar year 1980 as a result of theprice premium being paid by the U. S. S. R., butthe Falkland Islands incident, starting April 2,1982, resulted in a “total ban on imports fromArgentina” on April 10,1982, and the UK shareof Argentine maize exports remained at zerothrough 1985.

Shipments to Spain and Italy continued todrop, with especially dramatic decreases in1980 and 1981 as price premiums offered bythe U.S.S.R. directed the export flow away fromWestern Europe. Resumption of normal graintrade between the United States and U.S.S.R.reduced Argentine exports to the U.S.S.R. in1982, 1983, and 1984, but price relationshipsshifted the flow back in 1985. Spain and Italyalso regained some of their relative importancein 1985.

Soybeans and Soybean Meal

Soybean production is more concentratedgeographically in Argentina than corn produc-tion. It is produced mainly in three provinces:Buenos Aires, Cordoba, and Santa Fe (figurel-l). The Santa Fe region is the largest producerof soybeans producing twice the amount of ei-ther Buenos Aires or Cordoba.

7

The United States dominates world produc- tina produces about 7.5 percent (figure 1-3). Thetion of raw soybeans, accounting for about 60 United States and Argentina have increased thepercent of total world production while Argen- production of soybeans significantly since the

Figure 1-3. -U.S. and Argentina Production and Export of SoybeansAs a Share of World Totals (percentage)

World production100

90

80

70

60

50

40

30

20

10

0

United States– – – – Argentina

1970 1975 1980 1982 1984 85/86 87/88

World exports100 -

United States

90 — – – – – Argentina

00 —

70 —

50

40

30

20

1970 1975 1980 1982 1984 85/86 87/88

SOURCE: 1985-84: Food and Agriculture Organization, Producflon Yearbook and FAO Trade Yearbook, various years;1984/85-87/88: U.S. Department of Agriculture, Foreign Agriculture Service, Wor/d Oi/seed Situation and MarketHi@r/i@rts, Circular Series FOP 9-88, September 1988.

8

mid-1960s. U.S. production sprang from 19MMT in 1964 to 55 MMT in 1986, an increaseof 287 percent in 23 years. During this sameperiod, Argentina registered a 453-fold in-crease, from 17,000 MT to 7.7 MMT.

Export of soybeans followed a different pat-tern than production. Argentina reported noexports through 1975, but the volume increasedrapidly over the next 4 years and then stabi-lized at about 2 to 3 MMT. U.S. exports of soy-beans increased steadily through 1981.

In both countries, the percent of supply proc-essed annually followed a similar pattern upthrough 1971, with total crush ranging from 12to 35 percent in Argentina and from 48 to 62percent in the United States (figure 1-4). Butunlike the United States, Argentina exports ahigh proportion of its meal and oil–93 and 87percent, respectively (table 1-3). U.S. exports

represent 23 and 10 percent of its meal and oil.Argentine meal exports increased rapidly be-tween 1965 and 1984, capturing 12.7 percentof the world market (figure 1-5). Their share hasbeen relatively stable since 1984.

The destinations of soybean and soybeanmeal exports reveal U.S.-Argentine competition(table 1-4). Western Europe has been a majormarket for raw beans for both countries, receiv-ing 45 percent of U.S. exports in 1985/86 and60 percent of Argentina’s, Argentina has largerand more stable flows to the U.S.S.R. Japan ac-counts for a very small and intermittent propor-tion of Argentine exports but is a large and sta-ble customer for U.S. soybeans. In the case ofsoybean meal, Western Europe provides thelargest market for both exporters, causing di-rect and vigorous competition. East Europeancountries are of almost no importance as a des-tination for U.S. or Argentine exports.

Figure 1-4.-Volume of Soybeans Processed As a Percent of Total Domestic Supplies:United States and Argentina

United States90 – – – – – Argentina

0 I I I I I I I I I I I I I I I I I I I I I I I I I1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1968

SOURCE: Calculated from U.S. Department of Agriculture, Foreign Agriculture Service, Foreign Agriculture Circu/ar—Oi/seeds and ProducWVVor/d Oi/seed Situationand Market Highlights, various issues.

9

Table 1-3.–U.S. and Argentine Exports of Soybeans as a Share of Respective Domestic Supplies, 1965/87

Percent of usage Percent of meal Percent of oilexported as soybeans usage exported usage exported

Marketing year Argentina United States Argentina United States Argentina United States

1965 . . . . . . . . . . . . . . . . .1966 . . . . . . . . . . . . . . . . .1967 . . . . . . . . . . . . . . . . .1968 . . . . . . . . . . . . . . . . .1969 . . . . . . . . . . . . . . . . .1970 . . . . . . . . . . . . . . . . .1971 . . . . . . . . . . . . . . . . .1972 . . . . . . . . . . . . . . . . .1973 . . . . . . . . . . . . . . . . .1974 . . . . . . . . . . . . . . . . .1975 . . . . . . . . . . . . . . . . .1976 . . . . . . . . . . . . . . . . .1977 . . . . . . . . . . . . . . . . .1978 . . . . . . . . . . . . . . . . .1979 . . . . . . . . . . . . . . . . .1980 . . . . . . . . . . . . . . . . .1981 . . . . . . . . . . . . . . . . .1982 . . . . . . . . . . . . . . . . .1983 . . . . . . . . . . . . . . . . .1984 . . . . . . . . . . . . . . . . .1985 . . . . . . . . . . . . . . . . .1986 . . . . . . . . . . . . . . . . .

0 %0000000000

164669777563503444443519

290/o30303030353435373835373941404239454341353939

00/0000000096

37667070525071929493929592

180/020202121232522282926252427272928282723202423

0 %0000000

817023796653967845738097928994

250/o161816131822181416141117202123151817161411101987 a . . . . . . . . . . . . . . . .

aPreliminary.

SOURCE: U.S. Department of Agriculture, Foreign Agriculture Service, Foreign Agriculture Circular—Oilseeds andProductsAVodd Ollseed Situation andMarket High-lights. Washington, DC, various issues. Reference tables on the major producers and consumersof soybeans and soybean products.

Table 1-4.—Major Destinations of Argentine Soybean Exports 1975/76-85/86a(in 1,000 MT/percent of total in parentheses)

WesternDestination year Europe Japan China U.S.S.R. Mexico Brazil Others b Total1976/77 . . . . . . . . . . . . . . .

1977/78 . . . . . . . . . . . . . . .

1978/79. . . . . . . . . . . . . . .

1979 . . . . . . . . . . . . . . . . .

1980 . . . . . . . . . . . . . . . . .

1981 . . . . . . . . . . . . . . . . .

1982 . . . . . . . . . . . . . . . . .

1983 . . . . . . . . . . . . . . . . .

1984 . . . . . . . . . . . . . . . . .

1985 . . . . . . . . . . . . . . . . .

111(100.0)

(77.7)1,534(77.9)2,463(87.7)1,608(59.3)

782(35.4)

488(25.4)

729(51.4)2,297(741)1,779(59.5)

n.a. n.a.

n.a. n.a.

n.a. n.a,

(o)32

( n )

102(3.6)

(0)(1.17)

(0)747

(27.6)717

(32.5)716

(37.2)636

(44.8)149

(4.8)454

(15.2)

n.a.

n.a.

n.a.

(0.6)

(0)274

(12.4)122

(6.3)

(0)105

(3.4)297

(99)

n.a.(0)

n.a. 139(22.3)

n.a. 402(20.4)

150(2.2) (5.3)247(91) (3.4)266

(121) (2.9)515

(26.8) (1.15)

(0) (3.8)157 392

(5.1) (12.6)425

(0) (14.2)

111

623

1,969

2,810

2,709

2,207

1,923

1,419

3,100

2,987

aArgentine marketing year for soybeans is Apfil-March.blncl. “n.a.”c1975/76 “eXpOfiS” were less than 1,000 MT. No single data available.

SOURCES: 197W77-76179: JNG, Anuario 1961. 1979-65: Bolsade Cer6alesde B.A. Numero Estadistico 1966.

10

Figure 1-5.-Market Shares of World Soybean Meala Exports: United States and Argentina (in percent)

—

80 —

70 —

60 —

50 —

40 —

30 —

20 —

10 —

United States— — — — — Argentina

1965 1970 1975 1980 1981 19821983 19s40w5s5@686J87a7/as

a During the period 1965-85, this data includes soybean cake and meal

SOURCE: 1985-84: Food and Agriculture Organization, FAO Trade Yearbook, various years; 198485-87/88: U.S. Department of Agriculture, Foreign Agriculture Service,Wor/d Oi/seed Sltuatlon and Market High/lgtrts, Circular Series FOP 9-88, September 1988.

Wheat

As with corn and soybean production wheatproduction is concentrated in a relatively smallgeographical area. It is concentrated in fourprovinces: Buenos Aires, La Pampa, Cordobaand Santa Fe (f igure l - l ) . Most wheat isproduced in the Buenos Aires Province.

Wheat production in Argentina has beensmall compared with production in the UnitedStates, but the rate of increase between 1970and 1986 has been much greater. Productionhas ranged from a low of 5 MMT in 1970 toa high of 15 MMT in 1982 (table 1-5). Becauseof this extreme variability in production, Ar-gentina has frequently been an importer as wellas an exporter of wheat. Exports have also beenquite variable (table 1-5), and in 3 years since1981 have exceeded 7 MMT. The country’sshare of world wheat exports has ranged from2.6 to 9.2 percent since 1970, with a recent drop

following earlier increases (figure 1-6). The U.S.share during that period declined to less thanone-third by 1986/87, with mid-1980’s fluctu-ations.

The destinations of U.S. and Argentine wheatexports show a degree of market segmentationrather than direct competition (table 1-6). Ja-pan is a major customer for U.S. wheat exports,taking as much as 12.4 percent, but is only in-cluded in “others” for Argentina. The U.S.S.R.has recently been receiving 39 to 81 percentof Argentine exports, while it generally receivesless than 10 percent of U.S. exports. Only inBrazil’s purchases is there evidence of strongcompetition, with both Argentina and theUnited States exporting 2 to 10 percent of theirproduction to Brazil during the 1980s. Argen-tina’s loss of the European market reflects in-creased wheat production in Western Europebut may also relate to the shift to a low-protein

11

Table 1-5.—U.S. and Argentine Production and Export of Wheat, 1970-87 (in MMT/percent of total)

United States Argentina

Year Production Export Percent Product ion Export Percent

1970 . . . . . . . . . . . . . . . . . . . .1971 . . . . . . . . . . . . . . . . . . . .1972 . . . . . . . . . . . . . . . . . . . .1973 . . . . . . . . . . . . . . . . . . . .1974 . . . . . . . . . . . . . . . . . . . .1975 . . . . . . . . . . . . . . . . . . . .1976 . . . . . . . . . . . . . . . . . . . .1977 . . . . . . . . . . . . . . . . . . . .1978 . . . . . . . . . . . . . . . . . . . .1979 . . . . . . . . . . . . . . . . . . . .1980 . . . . . . . . . . . . . . . . . . . .1981 . . . . . . . . . . . . . . . . . . . .1982 . . . . . . . . . . . . . . . . . . . .1983 . . . . . . . . . . . . . . . . . . . .1984 . . . . . . . . . . . . . . . . . . . .1985 . . . . . . . . . . . . . . . . . . . .1986 . . . . . . . . . . . . . . . . . . . .1987 b . . . . . . . . . . . . . . . . . . .

36.844.042.146.548.857.958.555.648.258.164.675.775.465.870.766.056.957.3

19.816.330.432.927.431.925.930.632.537.441.248.241.138.938.824.928.438.5

(54)(37)(72)(71)(56)(55)(44)(55)(67)(64)(64)(64)(55)(59)(55)(38)(50)(67)

4.95.76.96.66.08.6

10.95.78.18.17.88.2

15.012.713.28.58.99.1

1.01.63.21.61.83.25.91.84.14.83.83.69.97.89.44.34.35.6

(20)(28)(46)(24)(30)(37)(54)(32)(51)(59)(49)(44)(66)(61)(71)(51)(48)(62)

aNumbers in parenthesesderrote the percentage of production used fOrexPOfls.bPreliminary.

SOURCES: Calculated from U.S. Department of Agriculture, Foreign Agdcu/ture Circu/a~GrainWodd Grain Situatiorrarrd Outbo/r,W ashington, DC, various issues,

Figure 14.-Market Shares of World WheataExports, United States and Argentina (In percent)

100

90

80

70

60

50

40

30

20

10

0

United States

- – – – A r g e n t i n a

1970 1975

a197&Mwhmtmdmq FIOur, inwedeWtiaient

1980 1981 1982 1983 1984 84/85 85/86 86/87 87/88

SOURCE: 1970-84: Food and Agriculture Organization, FAO Production Yearbook, various years; FAO Trade Yearbook, various years. 1984/85-87188: U.S. Departmentof Agriculture, Foreign Agriculture Service, World Grain Situation and Outbok, Circular Series FOP 10-88, October 1988.

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Table 1-6.—Major Destinations of Argentine Wheat Exports, 1975/76-85/86a

(in 1,000 MT/percent of total in parentheses)

WesternYear U.S.S.R. China Europe Brazil Bolivia Peru [ran Others b Total

1975/76 . . . . 940 N/A 299 181 N/A 779 2,923(32.2) (10.3) (23.6) (1.1) (6.2) (26.7)

1976/77 . . . . 100 N/A 438 933 282 N/A 3,644 5,448(1.8) (08.0) (17.1) (0.9) (5.2) (66.9)

1977/78 . . . . 1,123 N/A N/A 166 1,493(74.2) (1.8) (l.8) (2.9) (71) ( i l l )

1978/79 . . . . 109 N/A 141 1,377 303 N/A 1,862 3,855(2.8) (3.7) (35.7) (1.6) (7.9) (48.3)

1979 . . . . . . 238 885 202 1,494 353 918 4,149(5.7) (21.3) (4.9) (36.0) (1.4) (8.5) (0) (22.1)

1980 . . . . . . 2,272 665 853 209 162 126 4,375(51.9) (15.2) (0) (19.5) (4.8) (3.7) (2.9) (2.9)

1981 . . . . . . 2,954 126 287 3,660(80.7) (3.$ (1.6) (1.4) ( 5 . 0 ) - - (7.8)

1982 . . . . . . 2,742 258 512 3,811(71.9) (2.5) (0.4) (6.8) ( 2 . 7 ) - - (2.4) (13.4)

1983 . . . . . . 4,981 2,946 193 1,012 10,165(49.0) (29.0) (0.5) (0) (0.7) (1.9) (l0.0) (8.9)

1984 . . . . . . 2,853 202 200 158 1,200 2,313 7,269(392) (0) (2.8) (2.8) (2.2) (4.7) (16.5) (31.8)

1985 . . . . . . 4,613 877 548 1,866 9,604(48.0) (91) ( n ) (8.8) (0.9) (6.9) (5.7) (19.4)

aA~~~”tinernarkat~ng yearforwheat Is December-Novembec Bread Wheat.

blncluding NIA,

SOURCES: 197W76-7W79: JNG Anuerio 19S1. 1979-85: Bolsade C&eales de Buenos Aires.

spring wheat in Argentina’s production areas. protein, semi-hard spring wheat. Spring wheatThe decline in Durum wheat in Argentina has is the preference of Bolivia, Peru, and Iran,shifted the market to customers desiring low which all increased imports in the mid-1980s.

The primary corn and soybean productionarea of Argentina is flat to gently rolling, con-verted from natural pampas with little clear-ing required. Drainage problems exist in someareas, but the soils in general are black and fer-tile. Argentina relies heavily on beef produc-tion for domestic and export meat supplies.This beef is grown primarily on rangeland andfinished on high-quality pastures. This providesan opportunity if not the necessity of long-termrotations using legumes. Soil tilth and fertilityare therefore maintained more through rota-tions and nitrogen-fixing legumes than throughchemical fertilizers. The corn belt in Argentinais also an area of wheat and soybean produc-tion, and the southern part of the belt increas-ingly double-crops soybeans following wheat.

Production and Marketing Technology

The technology of production—including her-bicides, fertilizers, equipment, and culturalpractices–is modern and equal to that of U.S.farmers. Large tractors and combines are incommon use. Casual observation suggests thattractors may be somewhat smaller than on com-parable acreages in the United States, but cli-matic conditions in Argentina generally per-mit a longer harvesting and planting season,thereby lessening the need for large equipmentto complete cultural practices within a fewdays. Corn, soybeans, and wheat are harvestedwith large combines, and delivered primarilyby commercial trucks or farm wagons to coun-try elevators or local processors. Little storage,

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Photo credit: OTA Argentina Study Team

Argentina’s production technology is modern and very similar to U.S. technology.This is a typical corn harvestor used in Argentina.

drying, or handling equipment is found onfarms. However, an increasing number offarmers on larger farms have installed dryingand storage equipment.

In the marketing channel, processors and firsthandlers are highly mechanized with modernhandling equipment, including dryers, belts,dump pits, and hoists. A number of elevatorsand trucks do not have hoists, and hand un-loading was observed at several locations.Scales, equipment, and storage bins are simi-lar to those in the United States. Transfer oftechnology by U.S. and multinational firms isclearly evident in all aspects of production andmarketing.

Harvesting in the Argentine corn belt startsat 20 to 25 percent moisture. As in the UnitedStates, some farmers push these typical valuesto higher levels. In most regions winter stormsdo not present a threat to later harvest, but lodg-ing and potential field losses encourage earlyharvest. Consequently, nearly all corn must bedried at the country elevator. Most dryers arehigh-temperature, cross-flow, oil-fired equip-

ment. There is some movement toward multi-stage drying using natural air to remove the lastfew points of moisture in the storage bin. Con-crete silos and metal bins predominate at thecountry elevator. Platform scales, truck hoists,dump pits, belt and chain conveyors, and ver-tical legs are common, with designs similar toU.S. equipment. Multisieve cleaners are usedfor corn before the dryer and during load-out.Outbound grain is cleaned as required to meetthe No. 1 grade in response to the Government-mandated premium. Wheat and soybeans arecleaned less frequently, since broken kernelsare seldom a problem in these grains.

Export equipment and handling technologyinclude belt and chain conveyors, verticalbucket elevator legs, and concrete silos for in-bound grain. Cleaners are available in some ex-port houses to handle infrequent foreign mate-rial problems. Outbound equipment is primarilyhigh-speed belt conveyors and telescopingspouts for loading vessels. Grain from truckscan be loaded directly to the vessel with flight-type portable elevators when in-house capac-ity limitations require.

14

Typical advertising boards indicating technologytransfer by U.S. and multinational firms to Argentina.

Transportation from farm to first handler isprovided primarily by commercial truckers, al-though a few elevators and large-scale farmersown trucks. But the majority of the grain ismoved through commercial for-hire truckers.Soybeans are moved by truck and rail from thelocal elevator to the processing plant or to ports.Primary and secondary roads are in good con-dition, and grain trucks are in evidence on thefour-lane motorways.

Unofficial estimates place rail movements at30 percent of total transportation from the coun-try elevators. Rail is generally considered to bea cheaper form of transportation, but availabil-ity and inefficiency discourages the use of railcars. There are at least three different gaugesof railroad tracks in Argentina, creating signif-icant complications in transporting by rail be-tween regions. In addition, nearly all railroadshave been oriented toward Buenos Aires. Con-

sequently, transport to other locations almostnecessitates the use of trucks.

Port facilities are modern, although many ofthose operated by the Junta Nacional de Granos(JNG, the Government agency that regulates thegrain industry) are of an earlier vintage andoften lack modern renovation. Several new portelevators have been built since the ArgentineGovernment opened the export market to privatefirms and cooperatives. Further encouragementof private industry has resulted in expansionof existing port facilities and the developmentof new ones. In late 1987 it was reported thatthe Government had instructed the JNG to studythe privatization of its silos and handling facil-ities at major ports.

15

Marketing Channels and Practices

Corn, soybeans, and wheat move first to thecountry elevator or local processor or miller.From the country elevator the grain is shippedto export or processing plants or stored for laterdelivery.

At least one-third of Argentina’s soybeansmove into the export market on a fairly regu-lar basis. The processing capacity and the quan-tity of soybeans crushed has grown rapidly, re-sponding to increased production. The quantityexported appears to be a residual over domes-tic requirements but has almost always beena significant part of the industry. Almost all soy-beans are moved from producers to country ele-vators, although some large-scale farmers havebegun to bypass the country elevator and de-liver directly to port or processors. Many coun-try elevators also arrange for farmers or com-mercial truckers to deliver soybeans directlyto the plant or port in the name of the countryelevator, Exports of soybean meal have in-creased rapidly in Argentina, tripling between1981 and 1987. Domestic use of meal for feedhas been quite low, with no discernible trend.Since livestock feeding is primarily cattle onforages, the need for soybean meal has beensmall and limited primarily to a growing poul-try industry and a developing swine industry.

Photo credit” OTA Argentina Study Team

Argentina is increasing soybean production andprocessing significantly for the export market. Here

is the outbound leg of a soybean processingfacility under construction near Rosario on

the Rio Parana river.

Many corn processors buy directly fromfarmers, offering the same services as a coun-try elevator. After harvest is completed the proc-essors rely on country elevators for suppliesfrom storage. The market channel is organizedaround large flows to ports as 4 to 9 MMT areexported annually.

Wheat follows the same market channel. Lim-ited supplies of Durum wheat require preser-vation of identity in the market channel. Do-mestic millers using bread wheat are providedassured supplies through a Government allo-cation program that includes purchase at har-vest, storage at public and private warehouses,and export and milling quotas. Minimum priceguarantees and generous storage fees assureorderly movements during the season.

Organization of the Industry

Cooperatives are an important part of themarket channel in Argentina, providing notonly receiving and handling facilities but proc-essing as well. It is estimated that 40 to 50 per-cent of grain receipts move through 1,200 coun-try elevators owned by cooperatives. Thirty toforty percent of export volume originates withcooperatives, compared with 15 to 30 percentof actual exports.

The Junta Nacional de Granos owns a num-ber of country elevators and export facilitiesdistributed among the major port areas. Withseveral direct and indirect forms of encourage-ment from Government, cooperatives are as-suming a more prominent position in the ex-port markets. Two modern export houses at theport of Quequen were built by two cooperativeFederations—ACA and FACA—and they sharea high-speed loading facility and berth for oceanvessels. These facilities opened in 1986 and ef-fectively doubled the capacity of the port, cut-ting into the volume of the old (1946 vintage)export house operated by JNG.

The Argentine soybean crushing industry hasexpanded rapidly over the last few years as soy-bean production and exports of soybean mealincreased. These firms crush other oilseeds be-sides soybeans. The importance of soybeans in

the crush of individual firms varies from 5 to100 percent. Unpublished data show 25 proc-essors in 4 provinces, varying in size from 150MT per day to over 3,800 MT per day. Threeof the 25 firms reported capacity above 2,000MT per day; 8 reported capacity between 1,000and 2,000 MT per day. Total soybean crush inArgentina was estimated at 2.4 MMT tons in1983, increased to 5.6 in 1987, and was esti-mated at 6.2 MMT for 1988.

Marketing Practices and PricingStrategies Of Producers

Farmers’ marketing strategies in Argentinaare dictated primarily by the need for cash flow,repayment of loans, and high interest charges.Country elevators and processors generally pro-vide farmers with the option of a delayed price,in which a prepayment is made at the time thefarmer sets the price. They also use forwardprice contracts as well as spot price at deliv-ery. Prices are established on the basis of daily

quotes from the Bolsa de Cereals at each of themajor port areas.

The daily cash prices at each Bolsa becomea base from which the country elevators andprocessors offer a price to the farmer. Pricesare established prior to the opening of the mar-ket each day based on telephone calls made tothe major buyers in the cash market the previ-ous day. The average price of grain at the pre-vious day’s close then becomes the base for thenext 24 hours. In addition, individual elevatorsmay call processors or individual port eleva-tors and ask for specific bids for available quan-tities and qualities. All costs including trans-portation to the port are subtracted from thesebase prices. The actual quote to the produceris generally the price given by the Bolsa, butall the costs, including the commission chargedby the handling firm, are then subtracted to ar-rive at the farmer’s net receipts.

Elevators and handlers consider themselvesas brokers even when they are taking title to

17

the grain. They use back-to-back sales and com-mission on direct sales to avoid risk of pricechanges on inventory held in the elevator’sname. Only a few of the private elevators statedthat they were operating as merchandisers, tak-ing title to the grain and generating incomethrough price changes. Most private firms andall cooperatives identified their sources of in-come as commission charge and charges forservices.

Although the Chicago Board of Trade and theBuenos Aires Bolsa are familiar to nearly everygrain handler, country elevators make almostno use of the futures markets in Argentina as arisk-shifting mechanism. Little hedging takesplace on the part of the country elevator, andinternational firms are more likely to be usingthe Chicago Board of Trade through their of-fices in other countries than to be covering anylarge volume on the Argentine futures markets.

The Government establishes minimum pricesupports as protection for the producers andquotes these in the local currency, Astrals.These prices are adjusted for inflation and areannounced prior to planting, as a guide to pro-ducers. In addition, the Government establishesminimum prices at which export sales maybemade. This price is quoted in U.S. dollars perton and is intended to keep control over exportvolume and prevent currency drain from thecountry. The minimum price is generally ad-justed on a daily basis to keep it in line withactual market conditions. This minimum ap-proximates actual market price but prevents ex-porters from making sales below the minimumand making up the difference in other types ofcurrencies.

All exports of grain must be registered 24hours prior to the sale. Any deviation from thisregistration in terms of quantity, quality, or timeof shipment will result in a 15-percent penaltyto the exporter. Exporters who specify quan-tity and destination may renegotiate the regis-tration at a later date. If the registration speci-fies only quantity, destination unknown, theyare not allowed to deliver any above the con-

tract and must deliver within 10 percent of theoriginal volume recorded or pay their 15-percent penalty on the entire contract.

The marketing, milling, and exporting ofwheat differs from that of corn and soybeans.The Junta establishes milling requirements fordomestic supplies, subtracts these from esti-mated production, and issues export quotas forthe residual. The Junta purchases half the do-mestic volume of wheat and pays the millersto receive and store it. The other half is pur-chased on the free market. Millers accept wheatin any of the four numerical grades but mustbuy on official discounts. The milling industryis responsible for maintaining the quality ofwheat stored for the Government, but the JNGinspects the wheat that it has purchased.

The Junta has full responsibility for establish-ing grading standards, conducting educationalprograms, licensing inspectors, and grading allexport grain. It has the authority to enforce reg-ulations and levy penalties for violations. Thesecontrols, in conjunction with the Board’s re-sponsibility for export registration, pricing pol-icies, support prices, and credit programs, pro-vide considerable Government influence onArgentine production and marketing. Com-bined with the power in the Office of the Sec-retary of Agriculture to control seed varieties,the Government has the ability to control qual-ity and value of Argentine corn, soybeans, andwheat from development of new varieties tofinal exports.

The role of the Government in influencingquality generally does not extend beyond theport. Although the Argentine Governmententers into bilateral agreements with foreigncountries, it has little additional involvementin guaranteeing quantity or quality at destina-tion. It does not operate trade offices in import-ing countries, send inspection teams to super-vise destination quality, or do research on theneeds and preferences of buyers. The Junta hasno organized program of interviewing foreignbuyers to identify quality concerns, nor doesit document complaints or establish proceduresfor responding to them.

18

The Government does have indirect influenceon marketing and quality. It has long followedthe policy of taxing agriculture to provide pub-lic revenue. Those taxes have taken two forms:1) on imports such as fertilizer and pesticidesand 2) on exports. Prior to 1976, export taxeson wheat, corn, and sorghum were as high as50 percent, although these have been graduallyreduced. The effect of these taxes has increased

the cost of production in Argentina and dis-couraged pesticide use. Despite these obstacles,production has risen. Reduction or removal ofthe taxes will only encourage further expan-sion. In late 1987 the export taxes on wheat (5percent of export value), maize (15 percent), andsorghum (15 percent) were eliminated com-pletely. Taxes on soybeans for export were re-duced from 15 to 11 percent.

QUALITY CONTROL IN ARGENTINA

Grain grading and inspection in Argentinaare under the direct control of the inspectiondepartment of the Junta Nacional de Granos.Grades are established and administered throughthe JNG Laboratory. Test equipment is ap-proved, tested, checked, and calibrated by JNG.All inspections and analyses are required to bedone by inspectors licensed and trained by JNG.This provides uniformity in application ofgrades and inspection procedures all the wayfrom farmer deliveries to first handlers throughanalysis of samples taken during loading of ex-port vessels. Quality control is also tied in with


Junta grain inspector using Boerner-type divertor atJunta Central Laboratory in Buenos Aires.

other departments of JNG, such as the fiscaldepartment and the commercial department’spurchases of wheat for milling and export.

Grades for Corn, Soybeans,and Wheat

Grades for Argentine maize contain onlythree factors: broken kernels, foreign material,and damaged kernels (table 1-7). Moisture isfixed at a maximum of 14.5 percent for allgrades. Broken kernels are defined as materialthat passes through a 4.76-millimeter (12/64-inch] round-hole sieve. Foreign material iseverything other than corn that passes throughthe sieve and remains on top. Damaged kernelsare handpicked from a 50-gram portion and in-clude whole kernels and pieces of kernels thatshow evidence of damage of the same types de-scribed in the USDA standards. The definitionof damage is similar to that in the United Statesstandards but the interpretation is much morerigid. Any kernel that is not almost perfect incolor and shape is considered damaged. Gradesfor flint type must contain no more than 3 per-cent of other types or color. The regulation sam-ple size is 50-grams. However, many inspec-

Table 1-7.—Argentine Standards for Corn (percent)a

Damaged Foreign BrokenGrade kernels material kernels

No. 1 . . . . . . . . . . . 3.0 1.0 2.0No. 2 . . . . . . . . . . . 5.0 1.5 3.0No. 3 . . . . . . . . . . . 8.0 2.0 5.0%tmimum moisture for all grades IS 14.5 percent.

SOURCE: “Resumenes De Los Estandares,” Antonio Vicente and Nestor MarioTuzzi, 5th cd., Buenos Aires, Argentina, 1986.

19


Junta inspector hand-picking foreign material anddamaged kernels from corn sample

tors (including JNG) analyze two 50-gramsamples and average the results.

Soybeans have only one grade, with maxi-mum limits specified on the following factors:foreign material, broken (splits) and damagedkernels, moisture, other colors, and heat dam-age as a subset of damage (table 1-8). Foreignmaterial is defined as everything except bro-ken soybeans passing through a 4-millimeter(10/64-inch) round-hold sieve and all materialother than soybeans remaining on top of thesieve. Broken kernels, regardless of size, arehandpicked from the 50-gram sample. Damagedkernels are also handpicked from the sampleand include whole or broken kernels that showevidence of damage. As with corn, the defini-tion of damage is similar to that in U.S. stand-ards but the interpretation is much more rigid—kernels must be almost perfect in color andshape. Although official standards specify a 50-gram sample for analysis, in practice, duplicate

Table 1-8.—Argentine Standards for Soybeans(percent)a

Foreign

Broken Damage materialMoisture and splits Total Heat Total Dirt

13.0 . . . . . . . 30 5.0 2.5 3 0.5aArgentlna “989 only one grde for soybeans with the base for discounts set

at 1‘A impurities includlng 0.50/0 dirt. Factor limits shown in this table are max-imum values permitted with discounts above the base.

SOURCE: “Resumenes De Los Estandares,” Antonio Vicente and Nestor MarioTuzzi, 5th cd., Buenos Aires, Argentina, 19S6.

analysis is frequently used requiring two 50-gram samples, i.e., 100 grams of soybeans areactually analyzed.

Grading factors for wheat include test weight,foreign material, damaged kernels (total), heat-damaged kernels, broken kernels, smut, yellowkernels, and moisture. All factors except testweight and moisture are based on a 50-gramportion (table 1-9). The definitions and num-ber of factors are more complex for wheat thanfor corn and soybeans.

Test weight is based on kilograms per hec-toliter. Broken kernels are everything exceptforeign material that passes through a slottedsieve with 1.6-by-9.5-millimeter holes. Foreignmaterial is anything (including dockage) otherthan wheat that passes through the slotted sieveand all material other than wheat remainingon the sieve. Damaged kernels and heat-dam-aged kernels include kernels and pieces of ker-nels that show the same types of damage de-scribed in the U.S. standards, although, again,the interpretation is more rigid. Smut includesany kernel containing smut. Yellow kernels in-clude kernels not considered dark, hard, andvitreous. Protein is not a grade factor but ismeasured by standard, internationally ap-proved methods and provided as information.

Wheat varieties were historically divided intoDurum and semihard spring wheats. As a re-sult of disease problems, difficulty of segrega-tion in the export market channel, and empha-sis upon yield, the production of Durum hasdeclined dramatically. The great majority of va-rieties produced in Argentina and most of theirexports are now of semihard, low-proteinspring wheat. Separate grading standards ex-ist for spring and Durum wheats.

Quality Control Through Genetics

The influence of variety and type on the qual-ity of the corn, soybeans, and wheat is well rec-ognized by the Argentine Government and byindustry. The emphasis of producers in selec-tion of seed has been one of maximum profit,which, in general, means maximum yields. Asa result, the genetic selection over time has

20

Table l-9.—Argentine Standards for Wheata (percent)

Density b Damage Foreign BrokenGrade Hlt 1b/bu Total Heat material kernels Not DHVC Smut

1 . . . . . . . . . . . . . . . . . 78 60.6 1.0 0.5 0.75 1.5 15.0 0.12 . . . . . . . . . . . . . . . . . 76 59.0 2.0 1.0 1.50 3.0 25.0 0.23 . . . . . . . . . . . . . . . . . 73 56.7 3.0 1.5 3.00 5.0 40.0 0.3aM~imum moisture for all grades is 14.0 percent.bDensity is measured in he~toliters and ~onverted to p~unds per bushel, All other factors are measured in percent of Sample weight.cNot dark hard vitreOus kernel.

SOURCE: 4’Resumenes De Los Estandares,” Antonio Vicente and Nestor Mario Tuzzi, 5th cd., Buenos Aires, Argentina, 19S6.

moved toward higher yielding wheat varietiesdespite the loss of protein content and of someinternational markets that emphasize bakingcharacteristics. Millers reported a need forhigher protein and gluten strength but havefound producers and Government agencies un-willing to establish such requirements. Argen-tine corn has historically been of the flint type.Over the past decade, however, dent varietieshave gradually been introduced in the geneticcrosses to the point where there may no longerbe any significant quantities of the pure flinttypes known as Plate Maize. Semident and puredent varieties were being produced in the re-gions visited by the OTA study team; they werepurchased at the same prices as flint by someprocessing plants and were blended into an“Argentine Maize” a mix of flint and dent atsome of the export elevators.

Mandatory licensing provides the Govern-ment with some degree of control over the re-lease of new varieties. Currently a committeewith representatives from the processing indus-


Flint varieties are gradually being replaced by dentvarieties. Here are examples of flint, dent, and geneticcross of flint and dent. Flint-type maize is distinguishedfrom dent-type by kernel shape and dark red color.

tries, producer groups, plant breeders, and theGovernment review characteristics of each va-riety prior to their approval for licensing andrelease. The extent of this committee’s controldiffers among the three grains. Although thegroup has the potential for major impacts uponquality, its emphasis has in fact been on dis-ease resistance, plant characteristics, and yield.

In the case of wheat, protein levels are moni-tored, but varieties with 10- and Ii-percent pro-tein are still approved for release. Baking char-acteristics are tested and presumably if a varietywere submitted that did not meet an unspeci-fied minimum it would be rejected. In fact, mostvarieties submitted meet this minimum cri-terion before the plant breeders subject it to full-scale testing.

In the case of corn, flintiness is evaluated andpreferred, but visual appearance is the only re-quirement with respect to hardness and flintcharacteristics. Protein content, carotene con-tent, and resistance to breakage have all beenimportant characteristics in generating pre-miums for Argentine maize in previous years—in fact, for many decades. None of these char-acteristics are essential for approval under thecriteria implemented by present committees.The testing procedures are focused primarilyon yield and disease resistance.

In the case of soybeans, maturity dates, lengthof growing season, disease resistance, and yieldare the primary criteria used by the evaluationcommittee. Oil and protein content are re-corded but assumed adequate in any varietysubmitted by the plant breeder. Thus, the po-tential exists for limiting new varieties to thosethat equal or better current varieties with re-spect to oil and protein, but, in practice, value

21

in processing is not a criterion in the soybeanevaluation committee. The use of variety ap-proval holds considerable potential as a methodof influencing genetically related quality char-acteristics.

Evaluation of Quality in Argentina

The grades and standards for Argentine corn,soybeans, and wheat are relatively simple whencontrasted with those in the United States.Fewer grade factors and classes exist for eachgrain, This fact, combined with centralized con-trol of standards by the Junta, improves thequality of the delivered product. The Junta re-quirement that all grain in commercial channelsmust meet Condition Camara (when qualityfalls within the official grades and maximumlimits on moisture) assures proper condition-ing and cleaning of grain as close to the pro-duction point as feasible. Condition Camaratechnically applies to all grain sold but is notenforced at the farm level, where most farmerssell corn at moisture levels above Camara speci-fications. This is acceptable in that the first han-dler generally charges the farmer for cleaningand drying to assure Condition Camara, andthe farmer is paid on the basis of the clean grain.There are instances (e.g., during years of lowcrop quality) in which a new grade or excep-tion to the grade has been negotiated with theJunta to permit delivery of grain outside of theexisting grades. But it must be emphasized thatthis is a difficult exception to obtain.

With only three significant factors in gradestandards for corn and with strict control onmoisture for corn, soybeans, and wheat, grainthroughout the market channel is more uni-form. This reduces the opportunity for blend-ing as a source of income or of upgrading low-quality grain. Whether cause or effect, the in-dustry does not in general have physical facil-ities that permit or encourage blending. Large,flat storage facilities at the country elevators,a limited number of bins, and cleaners not con-nected into storage or the grain stream all pro-vide little opportunity for reintroduction of for-eign material or damaged grain once it has beenremoved.

The export house also provides little oppor-tunity for storage of different qualities in differ-ent bins. Where the study team was able to ob-serve the loading process, loaders were morelikely to be pulling fairly uniform qualities fromtwo or three bins at a time, not blending diversequalities from large numbers of bins. Uniformquality distributed between one or two gradeson inbound grain and on grain in storage makesit a relatively simple operational procedure toload ocean vessels according to contract speci-fications. Although there appears to be less con-cern about uniformity among sublets so longas each vessel average equals the contract, italso appears that it is seldom a problem becauseof the uniform quality of the grain used to loadthe vessels.

Each export vessel loaded in Argentine portsreceives a grade certificate specifying qualityfactors and grade. A review of the monthly sum-maries of quality recorded on the certificatesbetween 1982 and 1985 demonstrated that ahigh proportion of Argentine exports grade No.1 in the export house. Monthly variations inquality were found and are evidence that ex-port elevators do not consistently clean to zero,nor do they consistently blend to the contractmaximum. Quality variability has a seasonalpattern, with breakage and damage levels gen-erally highest at the end of each crop year. Ex-porters do not clean all grain to zero impuri-ties or broken kernels, but target below the No.1 limit. If the exporter were blending to the max-imum on every load, the average values wouldhave been higher. Exporters who desire to de-liver “better than contract quality” could cer-tainly achieve a lower average on several fac-tors. The Argentine grain handling system isequipped to clean to lower levels if there aresufficient economic incentives to exceed theminimum quality permitted under the grade.It appears that the export elevator, in general,ships what is received.

incentives for Quality in theArgentine System

The Junta Nacional de Granos establishes thediscounts and premiums associated with grades

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of corn other than No. 2. A premium of 1 per-cent is automatic for No. 1 corn. A discountof 1.5 percent is automatic for corn grading No.3. The base price is established in the Bolsa anddiscounts calculated from that base. Grain de-livered below No. 3 is discounted by individ-ual factors. These discounts again are estab-lished by JNG. This provides an incentivethroughout the market system for striving todeliver No. 1 corn. Since only three factors con-trol numerical grade (brokens, impurities, anddamage), it is relatively simple and inexpensivefor farmers to deliver No. 1 or to pay the eleva-tor to clean and dry their grain to No. 1. Thecountry elevators in turn have an incentive formaintaining quality in storage and for removingbroken kernels before shipping into the marketchannel. The maximum allowances for dam-age, brokens, and foreign material are greaterthan zero even for No. 1 grain and there is evi-dence that many grain handlers recognize theopportunity for blending on the grade factorsto achieve those maximums allowable for No.1 corn. These maximums were low enough,however, that the blending opportunities arefairly limited and provided little incentive forthe complex system required for the sophisti-cated blending found in the U.S. grain market-ing channel.

U.S. corn standards include a larger numberof grades, prices are based on No. 2 corn, andpremiums for No. 1 are infrequent and at theoption of the buyer. Export contracts generallyspecify one grade lower than the domestic trade(e.g., No. 3 corn, No. 2 soybeans). Consequently,there is an incentive to deliver the maximumallowed on each factor. The more factors thatdetermine grade and the greater the range be-tween farmer-delivered quality and export con-tract, the more incentives there are for blend-ing. Since domestic sales need not conform toany of the numerical grades, there is a muchgreater quality range in the U.S. market chan-nel than in Argentina.

Discounts based on numerical grade give thesame price allowances whether the lower gradeis determined by one factor or three. Discountsdiffer widely among elevators in the UnitedStates, but in general the sum of discounts on

individual factors for Grade 3 below Grade 2would be greater in the United States than the1.5 percent discount for the same grade differ-ence in Argentina. A discount of 1.5 percentfor No. 3 corn is equivalent to less than $0.03per bushel at U.S. corn prices of $1.80. ManyU.S. elevators have higher discounts. The dataavailable do not suggest that Argentine dis-counts offer greater incentives for quality im-provement than U.S. discounts.

Protein in wheat receives no consistentpremium, and the lack of interest in improvingprotein is evident in plant breeding strategies,farmers’ choice of variety, and the disinterestin protein on the part of most merchandisers.Millers would like a higher protein, and ex-porters occasionally find a premium market fora small volume supply, but the system is notorganized to convey this economic informationfrom millers and foreign buyers back to thosewho control genetic levels of protein. ManyU.S. wheat growers receive price differentialsbased on protein content.

Breakage and breakage susceptibility in cornand soybeans are of increasing concern to ele-vator managers, exporters, and processors.High-speed, high-temperature drying is gener-ally recognized as a major cause of breakage.Yet, few dryer operators expend time or moneyto control breakage susceptibility other than tominimize losses from excess breakage withintheir own plant. Thus, the Argentine systemprovides incentives for maintaining superiorquality in the market system on some measuresof quality but only on those incorporated in for-mal grading standards.

Whether the lack of incentives has resultedin construction of facilities unsuited to blend-ing or whether the construction of facilitieslimits blending regardless of incentive cannotbe determined. Still, it is a fact that incentivesexist, Yet the industry in general has not de-signed, built, or organized facilities and han-dling equipment to facilitate blending diversequalities for profit. The Government’s maxi-mum moisture in corn at 14.5 percent, in soy-beans at 14.0 percent, and in wheat at 14 per-cent limits the opportunity for wet grain to

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move in the market channel, As a result, eco-nomic incentives for drying appear to be lessimportant than they are in the United States,

However, shrink factors published by theJunta in official tables are, in fact, quite severefor moisture levels up to 16 percent. The de-sign of the discount table results in a gradu-ated shrink factor per point of excess moisture,with the most severe being the first point ofmoisture. The shrink per point declines asymp-tomatically to the actual water loss as the ini-tial moisture level increases. This does not pro-vide a deterrent to producers harvesting at 20to 25 percent moisture. The drying charge atthe country elevator plus a shrink factor thatis approximately equal to actual weight loss dur-ing drying is not conducive to constructing on-farm storage and drying facilities.

There is an additional incentive for quality,This is an intangible and nonquantifiable atti-

tude on the part of most of people throughoutthe market channel—from producer to exporterto Government official. The study team fre-quently heard that Argentina is proud of itsreputation of quality and is willing to make spe-cial efforts to maintain that quality and repu-tation. This was best reflected in a statementby a Government official: “We cannot competewith the United States with technology, price,and credit terms; we must compete by provid-ing better quality. ” This attitude was alsoechoed throughout the market channel by thosewho simply assumed that grain would be driedto safe storage levels at the first opportunityin the market channel, that blending was notconsidered a major source of income, that cus-tomer satisfaction was important in order tomaintain domestic and international markets,and that the best grain should be exported andproblem grain used domestically.

FINDINGS AND CONCLUSIONS

Argentine grain quality is influenced by sev-eral regulations, agencies, and incentives, be-ginning with variety approval and carryingthrough inspection at the point of export.Genetic control in corn, soybeans, and wheathas only minor influence on end-use qualities.The latent possibilities have not been exploitedas yet.

A simplified grading system, Government-decreed premiums for No. 1 corn, and a Gov-ernment mandatory grading system that beginsat the country elevator encourages clean, drygrain of uniform high quality with respect tograde factors. Argentina has only one grade forsoybeans and fewer numerical grades for cornand wheat than the United States. All grain in

Argentina that moves through the market sys-tem is required to meet one of these numerialgrades. If not, it is rejected and must be usedoutside the market channel.

Lack of on-farm drying and storage in Argen-tina results in delivery of most grain at harvestquality prior to storage. And a maximum mois-ture for commercial trade is mandated. Nearlyall grain is stored at safe storage levels, reduc-ing the need or opportunity for blending.

Quality as defined by grade factors is gener-ally better in Argentina than in the UnitedStates. Argentina’s grain is generally drier,cleaner, and less damaged. However, qualityin terms of value for processing is not uniformlysuperior.

Documents

The Argentine Grain System