Argentina’s Agricultural Industry and Regional Markets
Argentina is one of the most developed and productive nations in Latin America. With a population of more than 40 million citizens, Argentina’s gross domestic product (GDP) is of approximately US$900 billion. Domestically, the Argentine economy is divided into 11% agriculture, 29% manufacturing industry, and 60% services. Within the agriculture industry, Argentina’s main products are sunflower seeds, lemons, soybeans, grapes, wine, and meat. Because of the high level of industrialization and mechanization within the country, only 5% of Argentina’s labor force is employed in agriculture, while 72% works in the services industry.
Throughout the last decade, Argentina has experienced some significant economic hardships, such as lack of access to credit because of national insolvency and the nationalization of privately held oil fields. Nevertheless, the country has managed to stay within the positive range in terms of economic growth. Similarly, the new government of President Mauricio Macri seeks to regain the confidence of international investors by promulgating favorable legislation in order to bring more dynamism to sectors such as agriculture. This article explores the status of markets and dairy production in Argentina.
Argentina’s Agricultural Industry and Regional Markets
Argentina belongs to South America’s largest economic union, known as Mercosur, which seeks to integrate the markets of six regional nations. Bringing together more than 275 million citizens, the combined GDP of the Mercosur member states is of approximately US$5 trillion. Mercosur members, such as Brazil, Argentina, Paraguay, and Uruguay, enjoy preferential and easier international trade when it comes to goods and services within the regional union. This ease of trade applies to Argentine agricultural goods.
Argentina’s top dairy products include fluid milk, whole milk powder, cheese, and butter. Meanwhile, the total amount of milk production in Argentina during 2017 is projected to be of 10.6 million metric tons, while the aggregate export of dairy products is expected to total 212.00 metric tons. Currently, the total amount of head of cattle devoted to the national dairy industry is estimated at 1.6 million. Because of the economic hardships the country underwent during the last several years, the Argentine Peso has suffered substantial devaluations in the foreign exchange market. This dynamic has hurt the profits of dairy farmers given that the average market price per liter of milk decreased to US$0.25 (cents) throughout 2016. In recent years, the domestic market in Argentina has consumed some 1.8 million metric tons yearly, which accounts to 190 liters per capita annually.
Even though the devaluation of the Argentine Peso favors domestic exports, only a fraction of the national dairy production ends up being exported. Overall, Argentina’s most important trade partner is Brazil and this is no exception as it relates to the dairy industry. Interestingly, the second and third largest markets for Argentina’s dairy exports are Russia and Algeria with approximately 12% and 10% of the internationally sold goods, particularly cheese varieties. In terms of imports, Argentina’s purchases from the international markets are negligible. However, when products are imported they mainly come from the European Union.