URUGUAY – Finnish forestry giant UPM go ahead with USD 3 billion pulp plant in Uruguay (July 2019).
On Tuesday 23/07/2019, UPM announced the decision to construct a 2,1 million tonne greenfield eucalyptus pulp mill near Paso de los Toros in central Uruguay. This investment of USD 2,7 billion will grow UPM’s current pulp capacity by more than 50%. The mill is scheduled to start up in the 2nd half of 2022.Today, the plantations that UPM owns and leases in Uruguay cover 382,000 hectares. UPM will invest USD 350 million in port operations in Montevideo and local facilities in Paso de los Toros. In addition to the mill and port investments, UPM will invest in a new residential area in Paso de los Toros and provide temporary housing for the project personnel.
This project will also enhance infrastructures of the country and has significant impact on the economy :
1/ Efficient logistics chain is fundamental to the mill’s competitiveness and supply security in global markets. This will be secured by the agreed road improvements, extensive railway modernization and port terminal construction. UPM has decided the construction of a deep-sea pulp terminal in Montevideo port with an investment of approximately UISD 280 million. Direct rail access from the mill to a modern deep sea port terminal will grant an efficient supply chain to world markets.
2/ Based on independent socioeconomic impact studies, the mill is estimated to increase Uruguay’s gross national product by about 2% and the annual value of Uruguay’s exports by approximately 12% after completion.
In the most intensive construction phase, there will be more than 6,000 persons working on the site. When completed, approximately 10,000 permanent jobs are estimated to be created in the Uruguayan economy whereof 4,000 would be directly employed by UPM and its subcontractors. About 600 companies are estimated to be working in the value chain.
The mill will be located in one of Uruguay’s many free trade zones and pay a fixed annual tax of USD 7 million per annum. The mill’s value chain is expected to contribute USD 170 million in annual taxes and social security payments and contribute annually USD 200 million in wages and salaries.
The entire project would be the largest investment ever made in the country with USD 4 billion in total investment, or about 7 percentage points of GDP.
ARGENTINA-PARAGUAY-URUGUAY – EU-Mercosur free trade deal (July 2019).
The European Union and the South American trade bloc Mercosur (Argentina, Brazil, Paraguay and Uruguay – Venezuela is a full member too but has been suspended since 2016) reached a free-trade agreement on 28 June 2019.
The deal impacts a combined population of more than 780 million people (world’s biggest free trade area), and would save more than USD 4.5 billion worth of duties per year, according to European Commission President Jean-Claude Juncker. Both sides currently trade over €88 billion in goods and €34 billion in services each year.
The agreement is broad, covering both tariff and regulatory issues, including services, government procurement, trade facilitation, technical barriers, sanitary and phytosanitary measures, and intellectual property.
The agreement also opens up the EU market to goods from Mercosur. Of the EU duties on imports from Mercosur, 92% will be eliminated over a transition period of up to 10 years. However, the EU will limit imports of sensitive agricultural products such as beef, ethanol, pork, honey, sugar, and poultry; and these products will have to comply with the EU’s standards.
Cattle outlook: A new 99,000 ton annual quota for beef exports to EU member countries will be assigned to Mercosur and large South American livestock farms will be competing with smaller local cattle producers.
Another example with rice: Argentinean and Uruguayan producers (mainly) could further weaken the European rice market. In fact, rice from Mercosur countries is round grain, the same kind that is produced in the Spanish Levant. This would likely put Spanish farmers at a disadvantage given that the Mercosur rice would likely come at lower prices. This might create new market opportunities for those countries other than Brazil.
The list goes on but the agreement still needs to be ratified by the national parliaments of all member countries of both blocs, as well as by the European Parliament and EU Council. It may take 2 to 3 years before being effective. However, if Mr Macri loses the October presidential election to the leftwing populist ticket of Mrs Kirchner and Mr Fernández, there is a risk Argentina may opt not to stay in.
Bottom line, this agreement will create new opportunities for Mercosur farmers and might force to evolve the current predominantly farming family model across the EU to more modern sustainable industrial agricultural units or groups.
Paraguay – Back to more normal conditions (June 2019).
Flooding from torrential rains are behind us now at the farm. Over the first 20 days of May, we registered 600 mm of rains while the annual historical average is 2,040 mm. Soils were completely saturated with water. The good news is that the irrigation system channeled the excess water and drained most of the soil quickly.
A month ago, the level of the water at the main pumping station was up to the hand of Lucio, our farm manger.
Due to the velocity and pressure of the water, we had to replace some concrete pipes of internal roads by others we had in stock.
The roof of the master house of the farm, which was not of the most recent, was also affected and we had to replace it as you can see.
In some secondary drainage channels, we are consolidating inclination and wall thickness as part of the ongoing maintenance but we have before to dry the excess water to allow the access to machines.
This period of the year is always dedicated to maintenance, and channels as well as the reservoir should be almost empty which is not the case is as you can see. Overall general maintenance is delayed and remains affected due to this excess water but we will make it.
As harvest was over and production stored in our silos, we have no damage on production to report contrary to other producers (some neighbours had not completed their harvest when the flood started). For those who stored their production in silo bags, situation is also complicated as production was lost or damaged. Our silos provide convenience, safety and security to our production. Overall, certain people might consider us lucky as other activities (soybean, corn, cattle, etc) are more heavily impacted by the situation.
Now, we have restarted to deliver our paddy rice to our clients to fulfill our contracts. Over 5,000 tons have been delivered and 4,000 tons remains to be sold; local rice prices have increase in comparison with the latest cycle (between $160 and $165 per ton to start) but Brazilian market is slow and down in term of price due to Real currency.
Next step, we are soon going to start with land preparation of the fields. Land preparation is important to ensure that the rice field is ready for planting. A well-prepared field controls weeds, recycles plant nutrients, and provides a suitable soil surface for direct seeding.
ARGENTINA – Update on Curupi Pora farm activities (June 2019).
Situation/weather: Weather conditions improved in the north since February after having faced a very wet January. Cumulative rainfall for July – April was 1,596 mm, +24% compared with the historical average for the same period due to excess rainfalls registered from November to January this year (1,012 mm in 3 months).
Silage and pasture program: 208 ha of OAT and 145 ha of Ray-grass have been sowed instead of corn and are developing well. Ray-grass and OAT have both a high protein content to feed cattle and support high loads of animals per hectare. In addition, OAT is also cleaning the soil and improving its structure.
The heavy rainfalls which occurred previously favoured pasture development which were dry after past cycle (last year, the region suffered until April from an intense drought).
Cattle operation: Our cattle herd (5,595 heads currently) is in excellent shape and taking advantage of pastures densification. You can see below some of our categories.
Heifers 1 year old
Female Calves
Pregnant Heifers (1st pregnancy)
Pregnant Cows
Cattle sales took also benefit from better prices: Prices were up in 2019 as beef exports raise. According to the latest report from the under-secretary of livestock, beef production is down by 4.6% in comparison to 2018 while exports are climbing by 33% – of which China represents 67% of the exports in the 1st quarter of 2019 while it was 56% in 2018.
As a direct consequence, cattle prices were up between 67 and 74% (in AR$) since April 2018, and above inflation (55%).
ARGENTINA-PARAGUAY-URUGUAY – While China announces higher tariffs on US produce, South American nations can see opportunities (May 2019).
China has announced on 14/05/19 higher tariffs on a range of US goods including frozen vegetables and liquefied natural gas, a move that followed Washington’s decision last week to hike its own levies on $200 billion in Chinese imports. As an answer, the US are speaking on the possibility of raising duties of up to 25% on a further $300 billion worth of imports from China.
US farmers are among those most hurt by the trade war, with soybean sales to China plummeting and US soybean futures hitting their lowest level in a decade. Trump said on Monday that his administration was planning to provide about $15 billion to help farmers whose products might be targeted.
Farmers, who are a core political constituency for Mr. Trump’s Republicans heading into the 2020 presidential and congressional elections, are growing increasingly frustrated with the protracted trade talks and the failure to reach an agreement.
Meanwhile, this trade war is creating opportunities for Latam crops, especially for soybean and corn. To this aim, Argentina will exempt an import tax on goods that are used in the production of exports, such as soybeans (the world’s top soy-meal exporter).Those products will be exempted from an import tax that the government has raised a week ago to 2.5% in order to boost the tax revenue as the country deals with a severe economic crisis and annual inflation of 55%
In the trade war between the US and China, South American farmers may have a card to play.