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September 30, 2016

Fertilizer Purchases in Argentina up 50% Thus Far in 2016

When President Macri took office as Argentina's new president last December, some of his first actions were to eliminate the export tax on wheat and corn and to devalue the Argentine peso. He also indicated that the government would no longer interfere in the export market in an effort to hold down domestic prices. These actions were greeted vary favorably by the agricultural sector. In return, President Macri called on the farmers of Argentina to greatly expand their agricultural production and it appears that is exactly what they are doing.

Data from the Argentine Fertilizer Association indicate that from January through August of this year, Argentine farmers have increased their fertilizer purchases 50% compared to last year to 1.53 million tons. During the same period last year, they purchased 1.02 million tons.

During the four-month period from May through August, the increase was even more dramatic at a 58% increase. During those four months of this year, farmers purchased 1.21 million tons of fertilizers compared to 0.77 million tons during the same period last year.

The 2016/17 winter wheat crop was the first crop which farmers could take advantage of the new agricultural reality in Argentina. As a result, they increased their wheat acreage approximately 360,000 hectares to 4.30 million hectares or approximately 9%. Much of the fertilizers purchased in May and June were probably applied to the newly planted wheat crop.

The next and biggest response to the President's appeal to increase production will be the 2016/17 corn crop. Farmers in Argentina have just started planting their 2016/17 corn crop and it is expected that they will increase their corn acreage by 25% (+800,000 hectares) from 3.50 million hectares in 2015/16 to 4.30 million hectares in 2016/17.

Since corn and soybeans compete for the same acreage in Argentina, the increased corn acreage is expected to come from primarily a reduction in soybean acreage. The 2016/17 soybean acreage in Argentina is expected to decline 3% or 600,000 hectares to 19.40 million hectares.

In addition to increasing their acreage of wheat and corn, farmers in Argentina are expected to increase their use of technology and inputs in an effort to revitalize their grain production.