How protectionism blocks food crisis solutions: The case of Argentina

When Juan Martín Salas Oyarzun met recently with fellow farmers in the agriculturally rich Pampas region west of the Argentine capital, the thinking for the coming planting season was unanimous.

A little more wheat acreage, a little less soybean planting – and most of all, more sunflowers.

A similar shift toward sunflowers is occurring across Argentina, one of the world’s great food producers, as farmers adjust to the consequences of Russia’s devastating war in another global breadbasket, Ukraine.

Yet whether Argentine farmers will help alleviate a global food crisis made worse by the war is in doubt, with some analysts saying agricultural production has already been constrained by government policies.

“I’m sorry to speak of it this way, but we see this war’s impact on sunflower production as an enormous opportunity, if you consider that Ukraine and Russia together make up 80% of sunflower exports,” says Mr. Salas, whose 3,000-acre farm is blessed with some of the world’s richest soils.

“Argentina was once a much bigger producer of sunflowers” – its seed when crushed provides a cooking oil that is a staple in many parts of the world – “and we can do it again,” he says.

“And the truth is it will be both a pragmatic business decision to replace lost production elsewhere,” Mr. Salas adds, “and recognition that as farmers, producing food is our vocation. We do it with pleasure, yes, but also with a sense of responsibility to feed the world.”

Indeed, Argentine farmers are no strangers to sending their production across oceans. At the turn of the 20th century, Argentina became one of the world’s wealthiest countries – and Buenos Aires a great cosmopolitan capital – by exporting wheat and beef to Europe.

Impact of uncertainty

But whether a country that came to be known as “the world’s granary” will step up and produce more food hangs in the balance, agricultural experts say, for reasons ranging from skyrocketing fertilizer prices to government protectionist measures aimed at securing domestic food supplies and limiting food-price inflation.

“Argentina’s farmers are capable of producing more and want to produce more, but right now I’d say the right word to describe the situation is uncertainty,” says Guido D’Angelo, an analyst at the Rosario Board of Trade.

“Fertilizer prices are way up as global supplies have fallen, questions remain about how long and how much the war will affect exports from Ukraine and Russia, and in addition to that are the domestic government measures on [agricultural] exports,” says Mr. D’Angelo, whose home base of Rosario is the world’s second-largest port for agricultural exports after New Orleans.

“Farmers are aware of the world’s food insecurity,” he adds, “but all the uncertainty affects their planting decisions.”

Even before Russia’s invasion of Ukraine, the world was confronting mounting food insecurity, in part as a result of the pandemic. But now the United Nations warns that millions more people around the world will face hunger and even in some cases famine as a result of a war between two of the world’s largest food exporters.

Last week the U.S. government announced that for the first time in nearly a decade, it would use an emergency food funding authority to provide additional hundreds of millions of dollars to fight what the U.S. Agency for International Development describes as “historic levels of global food insecurity ... exacerbated by the impact Russia’s war on Ukraine is having on global food supplies.”

Protectionist measures

In Argentina, many farmers say they are ready and willing to help make up for lost food supplies.

But they also say that while they are thinking breadbaskets, the government of President Alberto Fernández is focused on its empty coffers.

Indeed, in recent weeks the cash-strapped and heavily indebted Argentine government has been zeroing in on the country’s dynamic agricultural sector to boost revenues by raising export taxes on some food products. The export taxes and in some cases limits on exports of some products – for example beef – are also seen as a way to dampen inflation, which is running at about a 60% annual rate.

The leftist government, whose political base is among urban middle- and working-class voters, says it’s acting to dampen domestic prices that are hurting average Argentine families.

Argentina is not alone in turning to protectionist measures, as dozens of countries move to limit food exports in response to global food shortages.

The World Trade Organization warned last week that export restrictions are already compounding global food shortages and rising prices.

Ngozi Okonjo-Iweala, the WTO’s director-general, told journalists in Washington she is strongly discouraging member states from imposing export restrictions and is pressing food producers to instead share surpluses with the world.

Still, she said she remains “very concerned about the pending food crisis.”

Farmer protests

The volatility in global food markets and the government measures taken in response are reverberating across Argentina’s agricultural communities – as was evident in the farmers’ protest that last month sent a parade of tractors and slogan-shouting rural Argentines to the gates of the presidential Casa Rosada in Buenos Aires’ Plaza de Mayo.

“Our role as farmers is to produce food, but if the government is taking 60 of every 100 pesos I earn, I reach a point where I can no longer produce and live,” said Darío Magi, a beef, pig, and chicken farmer from Saladillo in the province of Buenos Aires.

“We know the world needs food,” he added from atop his antique tractor within view of Casa Rosada, “but at some point if we’re being strangled we can no longer produce.”

For some Argentine agricultural experts, the rise in global food insecurity and tightening food supplies risks turning the country away from its roots as a great granary to the world.

“Argentina is a big food-exporting country, but right now it’s acting like a food importer,” says Augustín Tejada, an analyst at Buenos Aires’ Bolsa de Cereales, or Grains Exchange, citing taxes and limits on exports.

A recent study by the exchange concluded that without the government restrictions, Argentina’s food production would rise by as much as 40%.

Mr. Tejada says Argentina “stands before an important opportunity to consolidate its reputation as a stable and trustworthy food producer.” Seizing the moment, he adds, “would serve the country’s interests in the long run even as we fulfilled a historical calling to meet world food demand.”

Instead, he says the exchange is predicting that Argentine farmers this year will cut wheat production – a staple that because of the war is already lacking in some of the world’s poorest food-importing countries.

Missed “calling”

And then there are the sunflowers.

As recently as the 1990s Argentina was the world’s top producer of sunflowers, with up to 10 million acres planted with the sunny yellow blooms and seed-crushing capacity that made the country a top oils exporter.

After the fall of the Soviet Union, Russia and Ukraine rapidly took the crowns for top producers. But Argentina is now well positioned to replace production that will be lost because of the war, experts say.

Guillermo Pozzi, executive director of the Argentina Sunflower Association, says, however, that two factors – one practical, one political – are going to limit the country’s response.

First, a lack of sunflower seeds for planting will almost certainly curtail big dreams of more than doubling the acreage planted with the crop, Mr. Pozzi says. “Our seed producers weren’t expecting this sudden interest in planting sunflowers,” he notes, “so their production was stable and additional seeds won’t be easy to come by.”

But the agronomist with expertise in sunflower-seed breeding says it’s the government measures targeting agricultural production that more than anything risk dampening the Argentine farmer’s “calling” to plant and produce more.

“Like the American Middle West and Ukraine’s [East European] plain, Argentina’s Pampas has been blessed with the best soils in the world, and it makes me angry to think that we are not taking advantage of this gift as we could,” Mr. Pozzi says.

“We are a country of 45 million people and we produce food for 400 million,” he says. “But at a time of food shortages and rising numbers of hungry people, I think we have a duty to do more to share the fruits of this great gift with the world.”