Argentina: Farming crisis batters world food provider

"Probably, for a government that desperately needs income, it does not have very many options," says Birgit Meade, an economist at the Economic Research Service of the United States Department of Agriculture. But the timing, amid a world slump and then a relentless drought, sent shock waves through the industry. "Talk about a double, or triple whammy," she says.

The agricultural sector is expected to bring in 50 percent less in profit this year than last, losing $5 billion. Wheat production has dropped in half this season, to 8.5 million tons, and economists do not expect the nation to cover domestic demand. Soybeans are among the few crops for which farmers have not reduced plantings, but earnings and production are down. "The drought demonstrated the dramatic distortion of the Argentine tax system," says Gustavo Grobocopatel, one of the biggest soy producers in Argentina.

Drought hits cattle hard

For cattle-raising regions, like San Miguel del Monte, south of Buenos Aires, the drought has cut deeply. Here, the lakes have dried; pastures are so barren that cattle graze by the roads.

On a recent day, local producer Lorena del Rio looked at two dozen cows feeding on corn from a special plastic trough, an expensive alternative to pasture. Her family has lost eight of their 600 cows, and many cows are too weak to get pregnant. "It is horrible not to be able to feed your animals," Ms. Del Rio says.

The Argentine Rural Society estimates the country has lost 3 million cows since September, and ranchers are selling cattle they can't feed. The rate of female cows sold to slaughterhouses – considered liquidation at 43 percent – is about 50 percent.

Del Rio is among some 250 small- to medium-sized cattle producers in this town – which is increasingly dotted by soy fields. Two years ago, she joined the trend. "It's the only thing you can count on," she says. "It helps us invest back into cattle."

Soy production has doubled in the last decade, with 17.4 million hectares planted last year, compared with just 8 million a decade ago. "But that is not necessarily good for Argentina," says Mr. Ambrosetti. A monocrop culture depletes the soil and presents greater risk if the market plummets, he says.

Still, politically, many see a bright spot. Fernando Vilella, the former agricultural minister in the province of Buenos Aires who resigned over the oilseed export tax conflict, says that the Kirchners' loss in recent legislative elections bodes well for producers.

"All of the winners are in favor of a solution for the countryside," he says. "In my opinion, things are going to improve."

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