Focus on Paraguay

by Chris Lyddon
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Paraguay is a relatively small country sandwiched between Brazil and Argentina, but in soybean production it’s a superpower, trailing only its neighbors and the U.S. Maize is also an important crop, while experts see potential for greater wheat exports.

Production, however, will fall in 2011-12, according to the International Grains Council (IGC).

“In Paraguay, however, adverse conditions appear to have affected crop prospects, with output projected 800,000 tonnes lower than before, at 7.2 million tonnes (down from 8.4 million in 2010-11),” it said.

It put soybean exports at 5.4 million tonnes in 2011-12, down from 5.9 million in 2010-11, while soy meal exports are unchanged at 1.2 million.

The IGC put maize production at 1.8 million tonnes in 2011-12, compared with 2.1 million the year before. It put maize exports at 2.2 million tonnes in 2011-12, up from 1 million in 2010-11.

Paraguay’s wheat crop is too small to register in the IGC’s monthly report, but the USDA puts Paraguay’s 2011 wheat crop at 1.25 million tonnes.

In its Wheat Outlook report in January, the USDA’s Economic Research Service put Paraguayan wheat exports in 2011-12 at 900,000 tonnes.

Paraguay’s wheat exports doubled in 2011, according to a report carried by the Mercopress agency. The value of these exports have increased by 33% over the previous decade.

Dr. Mohan Kohli, an expert in wheat quality and grading, said Paraguayan wheat is making a name in world markets because of its high protein content (13%) and excellent baking quality.

“This is clear evidence of the success the wheat improvement program has had,” Mercopress quoted agronomist Sonia Tomassone as saying during a wheat congress in Asuncion. “For every dollar invested in research, we can have a return of up to 1,000 dollars.”

The wheat improvement program is jointly supported by the Paraguayan Chamber of Grains and Oilseed exporters, the Ministry of Agriculture and Livestock and the Agriculture Biotechnology Institute.

Dr. Kohli recommended that Parguay continue improving wheat research, bringing in new scientists. In Africa, for example, there are wheat diseases to which the Paraguayan strains are “100% susceptible.”

“We must continue to invest in agriculture and technology research so we can come up with different strains that are in demand worldwide,” he said. “Climate change will have a great impact on wheat production globally.”

Tomassone stressed the need to find alternative markets to Brazil, “which currently absorbs most of landlocked Paraguay’s wheat.”

According to an article published by Andres Trociuk of the Cámara de Molineros del Paraguay, a millers trade organization, there are some 30 mills of which 25 are active. Consumption of Paraguayan wheat is 450,000 to 500,000 tonnes a year.

MAJOR SOYBEAN PRODUCER

Paraguay is a major producer of soybeans and one of the world’s most important exporters, behind Brazil, Argentina and the U.S.

The USDA’s office in Paraguay predicts production at 7.8 million tonnes on an area increased by 100,000 hectares to 2.9 million hectares in 2011-12. That’s a fall from the 8 million tonnes the same office estimated for 2010-11 soybean production, on 100,000 fewer hectares. The USDA noted “the expectation is that there could be another La Niña weather pattern next year.”

“Because of the high yields and good soybean prices this year, producers will continue to buy and rent more land to put toward soybean production,” the report said. “The additional hectares will most likely come from cattle pasture in the eastern area of the country where soils are most suitable for soybean production.

“Cattle producers are receiving excellent prices as well, but those that can are participating in the movement of cattle herds to the Chaco (Northeastern region) where marginal lands are better for pasture and converting existing pastures in the east to soybean acres,” it said “A more aggressive expansion of more than 3 to 5 percent is not expected because there is an underlying negative public perception that biotech soy is taking over Paraguay’s pastures.”

The attaché cited figures putting the soybean crush at 1.525 million tonnes in 2010-11 and 2011-12. “Total capacity for soybean crush is 1.8 million tonnes annually if all plants are working full time,” the report said. “It is unlikely that the crushing industry will work at full capacity as sunflowers compete with soy for plant use (about 100,000 tonnes).”

According to the USDA, there are currently eight companies that manage crushing plants in Paraguay. “Cargill operates a plant that has an estimated crush capacity of one million tonnes and two additional plants are being built by ADM and Louis Dreyfuss/Bunge (as a joint project) that will add an additional two million tonnes and one million tonnes crush capacity, respectively,” the report said. “It is estimated that the plants will not be up and running until at least 2014.”

Bureaucracy has slowed the building process.

“Currently, the Ministry of the Environment is requiring special licenses and permits that are slowing down construction,” the attaché said. The report said domestic consumption of soybeans is steady at around 200,000 tonnes, with meal consumption for feed use also steady at 200,000 tonnes. “There are very few feedlots in Paraguay, and soybeans and soybean products are used in feed rations for the pork and poultry industries,” it said. “These industries are expected to grow in the future, but right now the issue hindering expansion is market access and meeting all of the sanitary requirements in order to be able to export more. Working toward meeting these requirements could take up to three years.”

Consumption of soybean oil annually for food use is not more than 50,000 tonnes, and no more than 5,000 tonnes is consumed for industrial use, the report said.

“Most biodiesel is made with animal fat. Soybean oil is a less attractive alternative since it is much more expensive. The majority of the biodiesel that is made from soybean oil is used for on-farm usage.”

Almost all of Paraguay´s soybean crop is biotech, USDA officials noted in a separate report on the use of GM crops.

“Although Round-Up Ready soybean is the only commercially approved biotech crop in Paraguay, the Government of Paraguay has recently sent positive signals about biotech crops by signing in October 2010 a resolution that allows field trials for several corn events requested by different companies,” the USDA report said.

“Paraguay’s royalty collection system is a well documented success story in the region and continues to operate as an agreement between Monsanto and the farmers. The government is informed once the price is set.”

ENCOURAGING BIOFUEL PRODUCTION

The Paraguayan government has moved to encourage biofuels production and the ethanol industry is growing.

“Local ethanol producers enjoy good returns and continue to invest in expanding output and becoming more efficient,” an attache report on the sector said. “Contacts indicate that today’s bottleneck is the limited acreage with sugarcane. The largest ethanol producer currently utilizes corn as its main feedstock. A couple of new refineries are expected to come online in 2012. Small volumes of ethanol could be exported starting in 2013.”

Biodiesel production is limited. “The local biodiesel sector is going through a difficult situation as its cost of production is higher than the cost of imported diesel,” the report said. “Local biodiesel commercial producers want the government to pass on this higher cost on to the consumer, but the government so far has yet not made a decision. Production is negligible as most plants are not operating.”

Despite this situation, Paraguay has great potential to increase its biodiesel production, as it is one of the world’s top soybean producers and exporters, the report said.

“There are some other alternative feedstocks which could also be used. A few public and private entities have research and extension programs focusing on jatropha, castor oil, and Coco Mbokaya,” it said.

Key Facts

Capital: Asuncion

Population: 6,541,591 (July 2012 est.)

Religions: Roman Catholic 89.6%, Protestant 6.2%, other Christian 1.1%, other or unspecified 1.9%, none 1.1% (2002 census).

Location: Central South America, northeast of Argentina, southwest of Brazil.

Government: Constitutional republic. Chief of state and head of government: President Fernando Armindo Lugo Mendez (since Aug. 15, 2008).

Economy: Landlocked Paraguay has a market economy distinguished by a large informal sector, featuring re-export of imported consumer goods to neighboring countries, as well as the activities of thousands of microenterprises and urban street vendors. A large percentage of the population, especially in rural areas, derives its living from agricultural activity, often on a subsistence basis. Because of the importance of the informal sector, accurate economic measures are difficult to obtain. On a per capita basis, real income has stagnated at 1980 levels. The economy grew rapidly between 2003 and 2008 as growing world demand for commodities combined with high prices and favorable weather to support Paraguay’s commodity-based export expansion. Paraguay is the sixth-largest soy producer in the world. Drought hit in 2008, reducing agricultural exports and slowing the economy even before the onset of the global recession. The economy fell 3.8% in 2009, as lower world demand and commodity prices caused exports to contract. The government reacted by introducing fiscal and monetary stimulus packages. Growth resumed at a 15% level in 2010, the highest in South America, but slowed to about 6% in 2011 as the stimulus subsided. Political uncertainty, corruption, limited progress on structural reform, and deficient infrastructure are the main obstacles to growth.

GDP per capita: $5,500 (2011 est.); inflation: 8.9% (2011 est.); unemployment 6.6% (2011 est.).

Currency: Guarani (PYG): 4,310.1 guaranis equal 1 U.S. dollar (Feb. 22, 2012).

Exports: $9.756 billion (2011 est.): soybeans, feed, cotton, meat, edible oils, electricity, wood, leather.

Imports: $12.06 billion (2011 est.): road vehicles, consumer goods, tobacco, petroleum products, electrical machinery, tractors, chemicals, vehicle parts.

Major crops/agricultural products: Cotton, sugarcane, soybeans, corn, wheat, tobacco, cassava (tapioca), fruits, vegetables; beef, pork, eggs, milk.

Agriculture: 23.1% of GDP and 26.5% of the labor force

Internet: Code. .py; 167,281 (2010) hosts and 1.105 million (2009) users.



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