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ARGENTINA – Review of Curupi Pora farm activities (July 2022).

Situation/Weather: The farm is in very good shape and has recovered from the previous drought period. However, pastures are less dense as they should be for the period due to lack of water previously recorded. Soil will need time to recover from the intense drought the region faced earlier.

Cattle: We have around 5,000 heads at the farm, in good body condition as you can see below in the various categories.

The herd was relatively resilient given the high heat recorded previously (mortality rate 0.6%). The most sensitive categories were supplemented, which obliged us to buy back fodder and pellets, whose prices are rising. We proceed to an early weaning so that mothers can recover before winter service. The annual production objective will not be met due to the impact of the drought on the cycle. However, we are registering good sale performance as market prices are at their peak. 480 Calves (male/female) will be sold in the coming weeks.

ARGENTINA – A rampant inflation (July 2022).

Argentines face the prospect of 90% inflation by year end after the brutal resignation on 02/07/22 of is economy ministers.  The dramatic exit of Martín Guzmán this month led to price mark-ups by many businesses. Some Argentines raced to the shops the morning after Guzmán quit, to try to stock up ahead of peso devaluation and price hikes. The Central Bank comes under pressure to let the peso depreciate more rapidly.

Consulting firms in Buenos Aires, such as EconViews, FMyA, Alberdi Partners and EcoGo, are now predicting 2022 year-end inflation of 90%. That would be the fastest pace since hyperinflation three decades ago, and the highest rate in the world outside Venezuela and Sudan, according to forecasts from the IMF.  Farmers are also hanging on to more of their crops than normal to defend against inflation. Growers have long used hoarding to shield against Argentina’s notoriously volatile economy, especially gyrations in currency and export taxes. But this year, spiraling inflation is exacerbating the dynamic (less than 45% of the global soy harvest has been sold).

More hoarding signals slower shipments of soy oil and soy meal at a time when food supply chains are already heavily disrupted by the lingering impact of the pandemic and the war in Ukraine. It also curtails hard currency flows to Argentina which exacerbate his debt problem. It’s a very volatile situation.

 

ARGENTINA – A complicated year for forestry (July 2022).

Among our assets, we have a forest of 750 ha called Tata Cua composed of pine, eucalyptus and grevillea trees. Fires in the region have again caused severe damage by burning more than 20,000 ha per day, destroying plantations (rice, corn, soybeans, pastures) during the peak period of the drought registered earlier this year. Given the risk of fire, many forest owners preferred to carry out cuts in advance. On our side, we have been looking unsuccessfully for operators to evacuate our death wood affected by fire in 2020.

Internal maintenance as well as the section bordering roads have been cleaned to prevent from fire or else have been performed.

Our options are limited given the damages caused by the fire and the current gasoil shortage which reduces our internal actions.

ARGENTINA – Fuel shortages may hamper harvesting and agricultural activities (June 2022)

Argentina is grappling with shortages of diesel fuel that powers tractors and trucks just as the soybean and corn harvests pick up in the powerhouse crop exporter (see article from LaNacion dated 16/05/22).

Farmers ready for fieldwork and truckers who drive the crops to port are reporting rationing and soaring prices across the Pampas growing belt and in the northern regions. Autumn is a time of busy truck traffic, which is the main means of transporting grains in Argentina to the ports around Rosario, the country’s main farming port hub on the banks of the Paraná River (around 86% of soybean transportation to Argentina’s ports is carried out by trucks, 13% by trains and the remaining 1% by ships). Argentina is the world’s biggest exporter of soy meal and soy oil and the 3rd biggest corn supplier in the world. Last year, the combined exports of those products generated over USD 30 billion.

Many farming activities depending on diesel use are affected and you can see below the “Gasoil supply map” created by Argentine transport association (FADEEAC) which aims to monitor in real time the availability of fuel in Argentina.

The big problem which is creating this shortage is the local prices of diesel. They are too low compared to imported products. If it’s imported as it is mostly the case, there is a big loss. Diesel production within Argentina rose only 1.5% on the year in January 2022. Refiners said they have stepped up imports despite rising global prices and sell locally at government-controlled prices nearly a third less. Finding diesel cargoes are not easy either, with Europe pulling the marginal distillate barrel instead of Latin America (see article from El Litoral dated 20/05/22).

Most countries in Latin America are very worried about the diesel supply chain. Demand for refined products has also increased drastically in Brazil but refineries aren’t able to satisfy those demands to. In our case, we have filled our tanks at San Bartolo and at Curupi Pora farms (2,000 liters each) and we are trying to stock as much as possible diesel via jerry cans. For now, our usual suppliers can only deliver 200 liters – so we are diversifying suppliers but prices are going up. On average, we need 2,000 liters per month for those 2 farms. We hope that the situation is going to reveres otherwise; we would need to reduce machinery activities.

ARGENTINA – Update on Curupi Pora farm activities (May 2022)

Situation/weather: Rains are back but remain still below the historical average for the season. Cumulative rainfall for July-April were 38% below the normal level. Stronger rains are forecasted in July. Winter period should also be warmer than usually. Short term, rainfall helped the regrowth of the pasture which were lacking. Soil will need time to recover from the intense drought the region faced earlier.

Cattle operation: We have around 6,000 heads at the farm, in fantastic shape as you can see. We are currently testing pregnancy of heifers previously inseminated. So far, we have registered around 2,000 births.

In terms of beef production, we reached 53% of the annual objective by end of April with 325 tons of production. Given the drought and all its implications, we will not be able to reach our annual beef production objective of 620 tons. However, we could maintain a high pregnancy ratio and a great shape of the herd which is essential to generate future incomes.

As previously mentioned, we are in the peak season of cattle sales. During May, we are going to sell 220 female calves and 260 calves. Market prices are at their peak (they could be higher if quotas were lifted). After 2 complicated years for the sector, economical results are improving and again profitable, the, although uncertainty persists due to the strong volatility and high prices of grains. Meanwhile, breeders highlighted the good wintering prices and the importance of beef exports to China.

ARGENTINA – Update on San Bartolo farm activities (May 2022).

Weather/Situation: We registered some more normal rains in April but still below the historical average for the same period (-42%). We were expecting that those rainfalls will help to boost the pasture regrowth but it benefit mainly to the regrowth of the natural vegetation (wild bushes, typical for the region of Salta which was formerly a forest area). Those subtropical wild plants are directly competing with pasture and as they need less water to develop, reducing the pasture area for cattle.

Vegetation control: Last year we perform a cleaning operation over 450 ha with machine, and 1 year after we can notice improvements’ in some plots but immediate regrowth in others. You can see below the difference between a plot cleaned last year and another 3 years ago.

Our case is not unique as our neighbours’ are facing the same situation. The only way some of them could “control” the situation is trough a massive use of chemical combined with manual cleaning operations. However, results are not homogenous and various chemicals have to be tested before as each field reacts differently. Not only such intensive use of chemicals has a cost (emphasized in the current environment) but has also incidences on the environment. As a corporate standard, we always tried to have a moderate use of chemical and rather use machine. Therefore, we are analyzing the opportunity to clean further 200 ha of fields and clean up by bulldozer the surface performed last year (450 ha).

Cattle operation: We have around 2,400 heads at the farm, mostly cows, heifers and calves. Our cattle is in good shape given the fact we were affected by dryness over the last 18 months. You can see below various categories of animals.

Our main difficulty here is to manage food: pastures area have been reduced due to drought/lack of water and the fast regrowth of the natural vegetation. Silage costs are also booming on the market (pellets) driven by increasing prices of cereals (+45% over the year). As a result, our beef production will be off by 70% in terms of kg (240 t budgeted).

Driven by all reasons mentioned above, we have decided to realize early sales of non-productive, empty or old cows in order to reduce feed and water use. The sale value of those animals will be higher than to keep them for another service, especially when meat prices raises significantly (+18% YTD) as it is the case currently.

ARGENTINA – Update on Curupi Pora farm activities (May 2022)

Situation/weather: Autumn is coming, and rainfall conditions are gradually normalizing but still remain below the seasonal norms. The Province of Corrientes has recorded its worst drought in 40 years. For livestock activities, it takes about 18 months to compensate such situation (production cycle, pastures, soils, water reserves). It’s the 2nd successive year of drought that we faced.

Cattle operation: We have currently above 6,100 heads at the farm. We have entered in the peak season of cattle sales.  We have planned to sale around 900 heads in the coming months (mostly female and male calves). You can see below 360 beautiful male calves being prepared for delivery.

Even if the exports quotas remain in place, prices have nicely increased over the latest months (+15%) and reached their 20-years historical highest. However, that doesn’t mean that profitability boomed. On average, costs of production have increased by 50% (inflation of salaries, +39% for gasoil, booming supplementation costs driven by high grains and oilseeds prices).

For the global overview, International beef prices will remain very firm, not only because of demand (China) but also because of the additional pressure exerted by price increases in grains and oilseeds, and energy, which will further impact the price of other types of meat, such as poultry and pork, whose production is more vulnerable to cost increases.

2-years steers prices (USD/Kg)

Argentina can position itself within a very limited group of countries that can continue to provide meat, based on pasture. A great opportunity for Argentina!

ARGENTINA – Update on San Bartolo farm activities (March 2022).

Weather: Cumulative rainfall for July-February period was 273 mm, -53% compared with the historical average for the same period. Drought has plagued the northern region since March 2021. Even if we are still facing heat waves, the good news is that we get again some rainfalls which immediately boosted the pasture in some plots. As autumn progresses, rainfalls are expected to gradually normalize.

Cattle operation: We have around 2,500 heads at the farm, mostly cows, heifers and calves. Dryness has affected the whole region for the last 18 months and has affected the shape of our herd at various levels (well-being, production, diet, fertility, etc) as well as pastures available.

We have around 1,100 cows and heifers’ and we are expected a bit more than 1,600 births between the 1st and 2nd spring service. We are performing an early weaning over 320 baby calves. Below you can see some weaned calves and on the 2nd video, none weaned calves. Early weaning has become a drought management tool. It provides the most cost effective way of maintaining cow condition to ensure that they get back in calf at their next joining.

In drought situations, early weaning enables you to use containment areas to reduce grazing pressure on pastures and control the risk of erosion. For us, it enables also an earlier sale of non-productive, empty or old cows reducing feed and water use. The sale value of those animals will be higher than to keep them for another service, especially when meat prices raises significantly (+18% YTD) as it is the case currently.

Under the challenging weather conditions we experiment, it is worth to perform the analysis of doing earlier sales of females or calves rather than to keep them and increase your costs (supplementation, vet, etc). It takes 18 months to recover from an intense drought as we faced. Therefore, we are in the process to sale between 350/400 calves in advance.

We are also analyzing the opportunity to clean further 200 ha of fields. Previous operation done give decent results (450 ha cleaned) and the farm needs permanent control of the natural vegetation which is typical for the region of Salta (a formerly forest area with a subtropical highland climate).

ARGENTINA – Unprecedented drought fuels devastating fires in Corrientes Province (February 2022).

Situation/weather: We are facing an extremely hot and dry summer. Argentina, Chile, Uruguay, Paraguay, southern Bolivia and southern Brazil have reported temperature anomalies of +10/+15°C, regionally in La Plata region above +20°C from long-term averages. These conditions mean temperatures around +48°C in northern Argentina.

We have 2 farms located in Corrientes Province: Curupi Pora (10,275 ha – 6,500 heads) and Tata Cua (750 ha – forest). The current situation is very stressful for both our livestock activity and our forest as fires are ravaging hundreds of thousands of hectares of land in province. More than 800,000 ha of land have now been consumed by flames so far (Article from Infobae, dated 18/02/22).The fires are burning at a rate of 20,000 ha per day, destroyed plantation (rice, corn, soybean, pastures). At least 70,000 heads of cattle have been killed. The province is currently recording rainfall of less than 10 mm versus 200 mm on the average for the season and a relative humidity of 15% when the usual would be around 70%.

Cattle operation: Heat weave are stressing the animals at various levels (well-being, production, diet, fertility, etc.). Grassing area are minimal due to the high temperature, forcing us to supplement the more sensitive categories and our water lagoons which are helping to refresh the heard, are almost empty. The situation is very complex and will affect not only productivity but also the body conditions of the animals for a while (Article from Infobae, dated 18/02/22).

Forestry: All our staff is in alert so as our neighbours for the detection of early fires. We have already experiment a strong fire in august 2020 which have strongly damaged our eucalyptus and pine tree plantation.

Corrientes Province Governor Gustavo Valdés has declared a state of emergency which will allow the use of emergency aid for operators like us.

ARGENTINA – Government reaches agreement with IMF to refinance USD 44.5-billion debt (January 2022).

After months of negotiations, President Alberto Fernández announced 28/01/22 that Argentina has reached a credit agreement with the International Monetary Fund that will allow the country access to new financing and buy it time to help it repay its USD 44.5-billion debt.

Without this new agreement, Argentina would have been faced with repayments, between principal and interest, of more than USD 9 billion in 2022, as much in 2023, and about USD 4 billion in 2024. Totally unsustainable, and the country would have been declared in insolvency on 01/02/22.

Argentina has pledged to slowly reduce its fiscal deficit and cut the Central Bank’s financing of the Treasury as part of an economic programme agreed with the IMF.  The deal would also give Argentina at least a four-and-a-half year grace period before starting to pay back its debt.

According to Argentine representatives, the key points of the agreement are as follow:

1/ Argentina will aim for a primary fiscal deficit of 2.5% in 2022, 1.9% in 2023 and 0.9% in 2024,

2/ Plans to reduce Central Bank assistance to the Treasury to 1% of GDP in 2022, 0.6% in 2023, and “near zero” in 2024,

3/ Argentina will continue with FX policy currently in place, without large devaluation jumps,

4/ The plan targets USD 5 billion in additional foreign reserves in 2022,

5/ Government won’t seek labour reform or privatise public companies,

6/ Argentina will continue with price controls as part of its inflation strategy,

7/ Plan also targets positive real interest rates.

The agreement needs know to be approved by the Congress as well as by the board of Directors of the IMF. In summary, Argentina has done with the IMF the same thing it did in 2020 with private creditors: push the ball a little further ahead. To be followed…