Focus on Uruguay
March 25, 2013
A successful agricultural exporting sector plays a major role in the economy of Uruguay, a country which ships a high proportion of its food products, including grains and oilseeds, abroad. Prospects for the farm sector look good, attracting interest from foreign investors.
According to the International Grains Council (IGC), Uruguay’s wheat production in 2012-13 is 1.3 million tonnes, compared to 1.6 million the year before. Maize production in 2012-13 is 600,000 tonnes, up from 500,000 the year before. Rice production is unchanged at 1 million tonnes. Soybean production is put at 1.9 million tonnes in 2012-13, up from 1.6 million.
In a recent piece on Union Agriculture Group, one of Uruguay’s top landowners, the Financial Times newspaper rated the prospects for agriculture in the country highly.
“In agriculture, Uruguay is already an interesting prospect. It has overtaken Argentina as a beef exporter and high commodities prices have encouraged foreign investors including El Tejar, the Argentine-based company that is the world’s biggest farm group, and George Soros’ Adecoagro, to invest in the politically stable country,” the paper said.
“As well as soya and corn, Uruguay has made great strides as a rice producer,” it said. “Furthermore, this year’s harvests in Uruguay are expected to be good, though whether they will beat records depends on how much dry conditions will have impacted, and that won’t be fully known for a couple of months.”
“We believe fundamentals for the agricultural sector will remain attractive over the long run given the finite stock of farmland available to meet growing demand for agricultural commodities,” the Financial Times quoted UAG chairman Juan Sartori, as saying.
“Farmers will also be celebrating a court ruling that scraps a planned tax on large land holdings (unless the government seeks to slap on some other levy to raise the money earmarked for rural development instead),” the article said.
The success of Uruguay’s agriculture has been noticed elsewhere. “China is a leading importer of Uruguayan beef and livestock-related products such as wool, leather and fur,” the China Daily website said in an article in February.
“Uruguay exports 70% of its meat, 75% of its milk, 95% of its rice, 70% of its wheat, 97% of its soybeans and 50% of its citrus fruit,” it quoted Tabare Aguerre, minister of Livestock, agriculture and fisheries saying.
“The diversity of our livestock and agricultural products makes us competitive, while our successful animal identification system has helped the meat industry develop at a rapid rate,” he said. “This traceability system is a powerful tool for disease control and the technology also enables us to control the quality.”
According the USDA attaché’s annual report on the oilseeds sector, the area planted in 2012-13 was set to remain stable at 950,000 hectares. “Although there is demand for soy, aggressive expansion is not expected as costs of production creep higher. Land rental prices are increasing and transportation costs are going up because of higher fuel costs and union demands,” the report said.
It echoed the IGC’s soy crop prediction. “With average yields, Uruguay can be expected to produce 1.9 million tonnes,” it said.
“Historically, nearly all soybeans are exported and very little is left for domestic consumption and/or processing,” the attaché explained. “In fact, up until now, Uruguay has been a net importer of soybean oil and meal. Most oil is imported from neighboring Argentina for food use and meal is imported to meet the domestic feed demand for the livestock and dairy sectors.
“However, domestic capacity and demand for crush has increased in recent years due to construction of new crushing facilities and biodiesel plants in order to meet the national biodiesel mandate.”
Uruguay’s National Fuel Administration (ANCAP) published a law in 2007 that mandates diesel be mixed with 5% biodiesel beginning in 2012. “Next year, Uruguay will produce more oil and meal than it imports for the first time in the past 15 years,” the attaché said. “It is estimated that 35,000 tonnes of soybean oil will be used for biodiesel next year.”
According to the attaché, Uruguay exports over 90% of its soybean production as whole beans and 70%-80% of all beans exported go to China.
“Imports of soybean meal are used for feed use in the dairy, livestock, and poultry sectors,” the report said. “Demand for feed is expected to remain strong.”
The USDA post put imports in 2012-13 at 100,000 tonnes. “Crush is expected to increase in MY2012-13 for oil production for biofuels,” it said. “Domestically produced meal, essentially a byproduct of oil production, will supplement overall feed consumption, lowering demand for imported meal.”
“Uruguay holds literally no stocks of soybeans or soybean products,” the report said.
The vast majority of soybeans grown in Uruguay are GM. “Genetically engineered soybeans are allowed in Uruguay,” the attaché said. “In fact, more than 99% of all soybean area is planted with Round-up Ready soybeans, which is the only variety that has been approved for commercial use.”
“In 2004, an 18-month de facto moratorium on biotechnology approval was put into place and subsequently removed in 2008,” the report explained. “Since its removal, several other varieties of soybeans have been approved for seed production for export only. It is estimated that less than 0.2% of total soybean area is dedicated to these seed varieties. Uruguay also allows field testing of new biotech crops.”
In a separate report on biotechnology, the attaché said that there are “currently eight biotech events available for production and commercialization in the country: one soybean and seven corn varieties.
“Planted area with GM varieties has steadily increased for both soybeans and corn, to reach a total area of 1.1 million hectares planted in 2011. Uruguay has a predictable regulatory process, is a global leader in intellectual property protection, and maintains a strong enforcement system in the seed industry. These combined traits create good potential for counter season production for American companies.”
Uruguay is a major exporter of barley malt. The IGC puts exports in 2012-13 at an unchanged 450,000 tonnes. Neighboring Brazil is the world’s largest importer of barley malt.
According to information supplied to World Grain by Uruguay’s Chamber Of Commerce and Export of Agriproducts, there are 16 flour mills in Uruguay which produce around 400,000 tonnes of flour a year. The ministry yearbook gives a estimate of the exact figure for 2011-12 at 402,622 tonnes. It put flour exports in November to October at 30,600 tonnes, 9% down on the previous year. About 97% of flour exports go to Brazil.
WHEAT CROP PROBLEMS
According to the yearbook issued by the Agricultural Programming and Policy Office (OPYPA), a unit of the Ministry of Livestock, Agriculture and Fisheries (MGAP), wheat yields reached a high of 3.4 tonnes a hectare in 2012, but a fall is predicted in 2013. Planting intentions were down by 26%, according to official figures, a change the yearbook blamed on lower prices in the first half of 2012 and high cultivation costs. The yearbook, written in November, also said that adverse weather, particularly frequent and intense rain in September and October, had caused extensive damage. It predicted a sharp decline in yields, probably to between 2.5 and 2.7 tonnes a hectare. An average yield of 2.6 tonnes would give a crop of 1.25 million tonnes, 50% down on the figure for the previous year.
It also predicted quality problems, but explained that high stocks of quality wheat from the previous season would be available to mix in store to improve the quality of the new crop wheat. Prices have risen, which will help to mitigate the effect on farmers of lower yields and reduced quality.
The USDA attaché noted the effect of increased grain prices on Uruguay’s beef industry in the most recent annual report on the sector. “The impact of high world grain prices will force producers to be more efficient as more pasture land is turned into crop production and feed costs continue to increase,” it said. “Due to current high commodity prices, the use of grains to feed cattle are in debate, as in many cases returns are negative.”
The attaché expected the use of sorghum to increase in the long term. “It is an excellent crop which is well adapted to Uruguay’s agricultural environment, and combines well in rotation with soybeans. Sorghum is typically produced on-farm and used as cattle feed in the form of humid grain silage and at a lesser extent as silage made of the entire plant.”
Population: 3,316,328 (July 2012 est.)
Religions: Roman Catholic 47.1%, non-Catholic Christians 11.1%, nondenominational 23.2%, Jewish 0.3%, atheist or agnostic 17.2%, other 1.1% (2006).
Location: Southern South America, bordering the South Atlantic Ocean, between Argentina and Brazil.
Government: Constitutional republic; Chief of state and head of government: President Joe “Pepe” Mujica Cordano (since March 1, 2010).
Economy: Uruguay has a free market economy characterized by an export-oriented agricultural sector, a well-educated work force, and high levels of social spending. Following financial difficulties in the late 1990s and early 2000s, economic growth for Uruguay averaged 8% annually during the period 2004-08. The 2008-09 global financial crisis put a brake on Uruguay’s vigorous growth, which decelerated to 2.6% in 2009. Nevertheless, the country managed to avoid a recession and keep positive growth rates, mainly through higher public expenditure and investment, and GDP growth reached 8.9% in 2010 but fell about 3.5% in 2012, the result of a renewed slowdown in the global economy and in Uruguay’s main trade partners and Common Market of the South (Mercosur) counterparts, Argentina and Brazil. Uruguay has sought to expand trade within Mercosur and with non-Mercosur members. Uruguay’s total merchandise trade with Mercosur since 2006 has increased by nearly 70% to more than $5 billion, while its total trade with the world has almost doubled to roughly $20 billion.
GDP per capita: $15,800 (2012 est.); inflation: 7.8% (2012 est.); unemployment: 6.1% (2012 est.).
Currency: Uruguayan pesos (UYU): 19.0995 pesos equal 1 U.S. dollar (Feb. 22, 2013).
Exports: $9.812 billion (2012 est.): beef, soybeans, cellulose, rice, wheat, wood, dairy products; wool.
Imports: $10.97 billion (2012 est.): refined oil, crude oil, passenger and other transportation vehicles, vehicles parts, cellular phones.
Major crops/agricultural products: Soybeans, rice, wheat; beef, dairy products, fish; lumber, cellulose.
Agriculture: 9.1% of GDP and 13% of the labor force.
Internet: Code: .uy; 1.036 million (2012) hosts and 1.405 million (2009) users.
Source: CIA World Factbook