Argentina Offering Subsidized Loans to Farmers to Avoid a Decline in Corn Acreage

Argentina’s farmers are switching from corn to less expensive soybeans, but soybeans are less tolerant and absorbent of excessive rainfall, which is a worrisome fact as El Niño has caused up to triple the normal rainfall in August in some areas of the Argentine Pampas.

Farmers are planning to cut corn sowing for a third consecutive season by 12% to 5.4 million hectares (13.3 million acres) when planting begins in September, from a record high of 6.1 million hectares in 2012/13, according to data from country’s ministry.

As a means to avoid an expected 20% drop in corn production, the state-controlled banks, Nacion and Provincia, will be offering subsidized loans to farmers with interest rates subsidized by a maximum 600 basis points.

“We need to prevent the drop in corn for environmental reasons,” said Juan Maceira, deputy for Argentina’s Agriculture Secretariat. “Farmers keep switching from corn to soybeans, and Argentina must avoid becoming a single-crop country if we want to avoid floods like the one we had this month.”

The announcement of the subsidized loan plan comes amid other tensions in Argentina’s agricultural sector. Farmers are requesting that the government change policies, including a 15% export tax on beef, a 20% levy on corn, and a 25% levy on soybeans, and three farm associations began a five-day halt to all crop and livestock sales beginning August 24.

Argentina is the world’s third largest soybean producing country after the U.S. and Brazil, and soybeans are responsible for nearly one third of the country’s budget. Despite this dependence, the environmental consequences of Argentina becoming a one-crop producer would be too costly in the long-term.