MercoPress. South Atlantic News Agency

Argentine dairy farms tempted to turn to wheat and soy

Dairy farms will have to wait until after the Elections for solutions

Farmers from Argentina's dairy belt, one of the most productive in the world are considering converting into cereals and oil seeds given the low reference prices imposed by the Argentine government.

"Will we continue with the dairy industry or should we become wheat and soybean farmers? has become the motto of the Dairy Provincial Forum which was launched over the weekend in the province of Santa Fe from where over half Argentina's milk production comes. Provincial authorities have also requested Argentina' Economy minister Miguel Peirano to raise the administrative price for powder whole milk exported thus helping to stimulate production and avoid dairy farmers from changing to other more profitable related activities. "We need a full reconsideration of all the production line and redistribution since currently it's more profitable to sell to the domestic market", said Roberto Colombero president of Santa Fe dairy farmers association. But "with no exports, there's no way to channel surpluses", admits Colombero who insists that unless the whole industry is reviewed and made more transparent, "milk will be in shortage again". Currently the official Argentine government target price for ton of powder whole milk is 2.100 US dollars a ton while the international market stands at 5.000 US dollars. The Argentine government gobbles any surplus above the administrative price level. Until towards the end of last year, high production and low prices helped exports of the Argentine dairy industry. But exceptional rains between March and April this year cut milk production in Santa Fe by 40% with price soaring to 80 US cents per liter at the farm gate. Dairy industries argue that unless the administrative price is not lifted to at least 2.900 US dollars there's no way exports can be viable. However dairy farmers insist that the price at the farm gate, given the current increase in costs, is "fair", and it's time dairy farmers and consumers don't end picking up the bill of distortions in the Argentine domestic market. In the letter addressed to Secretary Peirano, Santa Fe's Agriculture minister Daniel Costamagna points out that it's essential to increase the administrative price for the ton of powder whole milk because "industry must honor exports and farmers are facing higher costs caused by climate losses and the extraordinary increase in grains' prices". "Let us not forget this is a crucial month since dairy farmers have to make decisions for next year, and as things stand there's a chance a significant percentage could opt for agriculture", warns Colombero. Argentina's federal budget is fed to a significant extent with levies on agriculture exports, favored by an extraordinary world market for commodities. However in the case of dairy farmers as with so many other sectors and pending issues, any decision will have to wait until after October 28, when the wife of President Nestor Kirchner, Senator Cristina Fernandez de Kirchner is expected to be elected in the first round.