Boston, MA -- (SBWIRE) -- 05/02/2014 -- With an election on the horizon and a deteriorating economic environment, the Argentine grain sector will continued play centre stage over the medium term. With foreign reserves under pressure, grain exports (particularly soybean) will remain vital, but there is increasing evidence of hoarding, which could lead to clashes with the government over policy. Nonetheless, soybean will remain the pre-eminent crop in Argentina over the long term, and we expect the poultry production to show the most promise within the livestock complex. We have upgraded our pork production forecasts for 2014 owing to a change in historical data in previous years, although the country is likely to remain a net importer over the medium term. We see potential for a mild rebound in beef production, as sector fundamentals remain challenging despite a significant decrease in grain prices. The country's dairy sector shows relative promise, due to relatively high retail dairy prices and investment into the sector.
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- Corn production growth to 2017/18: 10% to 26.4mn tonnes. Our revised growth projections stem from lower average corn prices in coming years along with more substitution to soybean plantings. Some of this growth will also be due to base effects.
- Soybean production growth to 2017/18: 9% to 57.6mn tonnes. Growth will come from increasing export demand for soybeans along with more value-added products such as soybean oil. Soybean crops are also generally less capital-intensive than corn crops due to lower input costs.
- Poultry production growth to 2017/18: 17% to 2.5mn tonnes. Most production growth will come from improving trade demand, as we see comparatively subdued growth in the domestic market.
- 2014 real GDP growth: 2.2% year-on-year (down from 3.2% in 2013; predicted to average 3.9% from 2014 until 2018).
- Consumer price index (end of period): 30% y-o-y in 2014 (up from 10% in 2013).
Despite expectations for a record soybean crop in 2013/14, the Argentine government is unlikely to see the full benefit of improved revenues from the soybean sector amid a significant need for foreign reserves. The soybean sector is one of the country's largest generators of US dollars, but increased hoarding and stronger domestic demand due to a mild improvement in livestock production will likely limit exports of soybean products.
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