We have just sold 615 m³ of wood from Tata Cua forest (pines and eucalyptus) to a wood processor. The cuts will start on March 20 and be spread over 4 months. The panted surface with trees is amounting to 580 has of which 48 has are going to be cut.

While discussions on Argentina’s debt with IMF and bond holders (creditors) are ongoing, Argentina is having difficulty raising cash with which to pay the lenders. Now, the government is set to deliver another duty blow as it taps the nation’s growing agriculture industry to try and deal with budget woes. Many of Argentina’s farmers are still reeling from a tax increase on crop exports that hit them late last year.

President Alberto Fernández plans to raise export levies on soybeans as it seeks to bridge its fiscal deficit. The taxes will rise to 33% from the current rate of 30% (a 3% points increase is expected to generate USD 500 million incomes more for the state). Although the timing of the announcement is still unclear, this move would mark the second increase in agricultural taxes since President Fernández took over just over two months ago. The policy reverses the bias favourable to the farmers of Macri’s administration. Likely other commodities like corn or wheat may see their existing exports duties increased in the coming months. When Mrs Kirchner ended presidency in 2015, soy exports were subject to duties of up to 35%, with 20% corn and 23% on wheat. To be continued …

We were expecting some rains to boost pastures as the current period of the year use to be very hot and dry in Salta region, but torrential rain hits Salta and Tucumán provinces in northwest Argentina. The storm and heavy rain from 8 to 9 February 2020 caused flooding and several damages, forcing also local authorities to evacuate people as you can read (“Article from Infobae, dated 11/02/20”). You can see the situation of El Dorado River which is surrounding our farm. This bridge is located 12 km upstream from the main entrance of the farm.

Over 150 mm of rain fell in 24 hours at San Bartolo causing several material damages (fences, broker trees, equipments, etc) but also affecting our cattle operation.

The corral, which has been refreshed, was affected and we had to evacuate the houses of the personal as they were under water. We never faced such a heavy rain there. The good news is that none of the personal has been hurt.

The gauchos are trying to regroup the cattle of flooded sections to transfer them to dry areas in order to prevent sanitary issues (hoof disease, tick, etc) and cattle losses (shrinking, weight loss, injury, etc). Mothers and young calves are the most sensitive categories, and need food supplementations given their morphology.

This situation will clearly affect births and natural service (peak period until mid-February) as well as the meat production (target of 350 tonnes) as the available grassing area have been reduced. Fortunately, we decided to sell some selected cattle in advance to reduce the herd and take advantage of some market opportunities.

The water has now to evacuate but we already know that it will be slow as the problem is emphasised by the illegal internal protection walls build by some farmers upper the river which affected and changed water course (a legal action is ongoing and cleaning plans have already been approved by local authorities).

The situation is complex but the team is focused to secure the herd (around 3,000 heads) with food in dry areas and to emphasis sanitary controls. The growing number of unusual and unpredictable weather events makes farming a riskier business these days.

Situation/weather: Local authorities have now finalized a cleaning plan of the river El Dorado and its infrastructure. A legal action is being taken also against the farmers upper the river who built illegally internal protection walls which affected and changed the water course. Adjustments will begin after the rainy season in 3 months.

For now, some rains are forecasted during the 2^nd and 3^rd weeks of January and they will help to boost pastures. This is going to help some mothers to continue to keep their calves and differ a bit the early weaning process.

Cattle operation (3,160 heads): We are in the peak period for natural service of the cows (up to mid-February). The cows are in good shape and no ticks; until March, we are in the peak season for many pests and we emphasis sanitary controls during this period as we have 1,500 cows in service (mothers and young calves are the most sensitive categories are they are more fragile and vulnerable).

Heifers 1-2 years old

Cows in service with their baby calves

We are also going to take advantage of the recent increase in grain taxation to rebuilding our corn stocks for silage as prices are attractive for us. Corn and wheat for example are now more than double taxed and profit margins are going to be squeezed.  That could force farmers out of crop rotation strategies that proliferated in recent years to plant cheaper soybeans instead.

Argentina’s new government has hiked export levies on soybeans, wheat and corn. Rates for soybeans, soyoil and soymeal are 30% from about 25% and corn and wheat to 12% from around 7%. Beef export taxes were raised to 9% from 7%

The nightmare comes true for Argentina’s farmers.

Situation/weather: While drought has ravaged the wheat and barley crop on the Pampas growing belt, we have an optimal situation and weather. Thanks to a wet previous cycle and the current usual hot temperature for this period of the year, pastures have been boosted and are now highly abundant and dense in all section of the farm.

Even Santa Lucia River with his current optimal level allows a direct drinking access to the cattle and expands the grazing area bordering the limit of our farm with the river. The farm is in excellent shape thanks to the permanent hard work of the gauchos and their manager, Ricardo Borda.

Silage and pasture program: We have sowed around 150 ha of corn, which will be use later to feed the herd. Herbicide has just been applied and we are expecting yields around 4.5t/ha.

As part of our program, we are in process of sowing subtropical pastures (Bracchiria) which showed good resilience to heat waves and water shortfalls.

Cattle operation (4,700 heads): The cattle is in excellent shape as you can see for the various categories. We have started the insemination process of the heifers.

Heifers

We are also anticipating some market conditions changed by selling some male calves (180 kg) as well as some fattening cows (460 kg). Across all categories, we are planning to sell around 1,500 heads.

Australian water tank (400,000 liters of capacity)

Situation/weather: After having faced a wet summer as Northeast Argentina has been hit by extensive flooding (please refer to post of January 2019), water is evacuating more slowly than it used to, reducing the available grassing area for the cattle.

Our situation is not unique as our neighbours are facing the same situation. After having performed some investigations, it appears that not only the river has been affected by the flood faced earlier this year, but some illegal internal protection wall built by some farmers upper the river has changed the water course. Local authorities are investigating to identify the origin of the problems and to take measures against. Meanwhile, we are also talking with our neighbours to the local authorities so that they start to perform readjustments in the river and authorize us also to build some internal protections to prevent.

Cattle operation (2,613 heads): Overall the cattle is in decent condition given the situation faced earlier this year (heifers and female calves suffered the most). We are working on the improvement of the heifers since beginning of December; we will start with the insemination process of the heifers. We have currently 363 heifers (2 years old) at the farm. Our objective is to achieve a pregnancy ratio above 80% with 80% of weaned calves. Last year, we registered 76% of pregnancy ratio.

20 young bulls (2 years old) have just been transferred from Curupi Pora farm for genetic purpose. Bull selection can be the most powerful method of genetic improvement in the herd. However, young bulls have not the same fertility power as they are still growing and so far, they have only been fattened (overly fat). Bulls should be gradually stepped down in condition to avoid nutritional disorders and adverse effects on semen production.

Alberto Fernandez had 48.1% of the vote, ahead of Macri’s 40.4%, with more than 97% of ballots counted, putting the center-left challenger over the 45% threshold to avoid a runoff and win the election outright.

Fernández’s win signals the return to national power of Peronism, tilting the nation back toward left-wing populism at a time of economic crisis.  But while voters rejected the austerity of Macri’s government, the outcome was also tighter than expected, reflecting wariness about Fernández’s ability to steer the economy through tricky waters.

President-elect Fernández, who assumes office on 10 December, will run into immediate difficulty given the lack of funds to play with: The economy is contracting, inflation is above 50%, and unemployment is more than 10% and 35% of the population lives below the poverty line. Investors also expect the government to default at some point. Macri’s administration racked up debt to cover the bloated deficit he inherited from former president Cristina Kirchner.

He must also satisfy the competing demands of far-left factions in his broad coalition that want more social spending, and the International Monetary Fund, which agreed to a record USD 56 billion bailout last year. The IMF will likely have little appetite to dole out more cash if Fernández implements policies that risk a balanced budget.

His victory, and the uncertainty around it, comes at a fragile moment for Latin America. A wave of violent, anti-austerity protests has rocked Chile and Ecuador; Peru faces major political uncertainty; Venezuela’s economy has collapsed; and the presidential election result in Bolivia has been called into question.

Shortly after the result was announced Sunday, Argentina’s central bank (BCRA) announced it is tightening currency controls. US Dollar purchases will be restricted to USD 200 per month, down from USD 10 000 per month. These measures, which were implemented to preserve the reserves of the central bank, will remain in place until December.

On September 1^st, Argentina’s government has imposed capital controls to stop a slump in foreign currency reserves and the peso that has pushed the country to the brink of default.

The announcement comes as Argentina’s currency crisis spirals out of control. About $3 billion drained out of foreign currency reserves between 29 and 30 august alone as the government struggled to repay short-term debt and slow the drop in the peso. 

The financial crisis has also been exacerbated by Macri’s defeat in a recent primary poll. The peso collapsed more than 25% last month after primary election results showed the market-friendly government of Macri has little chance of retaining power in October’s polls. President Macri has given up trying to restore investors’ confidence and has instead resorted to the policies he had criticized his predecessors for imposing.

Briefly, the central bank will now requires exporters to repatriate within 5 days earnings from sales abroad, while all companies, not just banks, must seek authorisation to sell pesos for foreign currency. Individual Argentines will be limited to dollar purchases of no more than $10,000 a month. These measures, which will be effective until December 31, 2019, were designed by the Argentine Government as a temporary emergency solution to prevent the dollarization of certain cash flows.

For now, these measures are not affecting directly our business in Argentina as we are not an export company and sale locally in peso our beef production. However, we believe this is an initial step of a return to heavy state intervention.