The FINANCIAL — The world’s population is forecast to rise to 9.6 billion by 2050. One of the biggest challenges is to provide enough food. The UN Food and Agriculture Organization suggests that global food production needs to rise by 70 per cent to meet demand. Consumption patterns are changing in developing countries with more animal protein in diets. Rising living standards also mean that people want more and better quality food.
In many developed countries, land is scarce and in demand for other uses such as housing. In contrast Latin America has one of the world’s largest areas of land for cultivating, and both the climate and the rainfall needed for food production. Argentina has 38 million hectares (94 million acres) of arable land, much of it highly fertile. It has made use of modern production methods such as no-till farming, which leaves the soil undisturbed, increasing land productivity. It has also positioned itself as a “counter-season” producer, exporting fruit and vegetables to the US in winter.
As a result, the country exports large quantities of soy, wheat and corn. It ranks among the top global biofuel producers and is the world’s leading exporter of soybean oil, notably to China. Argentina’s agriculture sector, which accounts for between 12 per cent and 15 per cent of GDP, contributes 50 per cent of the country’s exports, with products ranging from soybean oil, honey and lemons to beef, corn, olives and peanuts.
While Latin America’s historic markets focused on the US and Europe, much of the potential for trade today is in the “South-South” corridor with Asia. China is now Argentina’s largest export market for agricultural products and its second largest trading partner. According to the World Trade Organization, trade with China in 2012 was USD15 billion. In 1990 it was USD300 million.
China’s agricultural imports have grown at a compound annual rate of 21 per cent since 1998/99, as incomes rise and demand grows. Only 2 per cent of China’s corn, soybean and wheat were imported 15 years ago; the figure is now 20 per cent and rising.
Relations between the two countries run deeper than trade. China has become Argentina’s third largest source of capital and Chinese investments (outside the financial sector) have reached USD7 billion. Axel Kicillof, Argentina’s Economy Minister, expects further Chinese investment in areas such as infrastructure, energy and railways.
Agriculture offers an opportunity for Argentina to attract foreign investment and boost trade. With global food demand set to surge, a report from HSBC Global Research suggests that worldwide use of cereals and oils will grow by 1.7 per cent per year between 2010 and 2018, while consumption of meat and dairy products could grow at more than 2 per cent per year. Agriculture is likely to remain key to Argentina’s future.
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