Brazil’s burgeoning agricultural economy and sheer production capacity make it a formidable export competitor for Australia, but its South American neighbours are potentially even stronger, more sophisticated market rivals.
Uruguay, Argentina, Paraguay and Chile are “ones to watch” says ANZ’s agribusiness research director, Michael Whitehead.
In fact, he notes, the agricultural investment world is already closely watching, and investing in, the potential growth of these Latin American countries.
“Think of Uruguay as pretty much a European country in South America,” he said.
“They’ve got a reputation for good governance, a good attitude on biosecurity, good technology and agricultural support structures.
“Its agricultural sector is increasingly all about quality production and reliability of supply.
Investor appeal
“Global capital markets have, for some time, been paying increasing attention to investment options in Uruguay.
“It’s also high on the relationship radar for China, which now buys more beef from Uruguay than Australia.”
Mr Whitehead said while South American agriculture had long been hamstrung by political instability, government level inefficiencies, unpredictable taxes and rampant inflation, much had changed in the past 10 to 15 years.
Argentina’s not quite as sophisticated as Uruguay, but it’s a big agricultural economy and it’s something we’ll all be talking about a lot more
- Michael Whitehead, ANZ
Importantly, much of Latin America was also blessed with good farming soils and generally consistently productive seasonal conditions.
Even many long-running agricultural disease issues such as foot and mouth (FMD) had, increasingly, become non-issues today.
Uruguay, which produces beef, wool, soybeans, cereals, horticultural crops and dairy products, was now a leading economic performer.
Despite a financial crisis in the early 2000s, it was now considered a high income country by global standards.
In 2013 Uruguay was named “Country of the Year” by Britain’s The Economist magazine, recognising its performance as a socially developed and productive economy.
FMD-free Uruguay exports 75 per cent of its fully traceable beef production, which is growing at almost 3pc annually.
Mr Whitehead said Chile was a similarly strong investment target for international capital having developed into another socially stable and prospering economy with relatively high living standards.
Horticulture, in particular, was a growth industry, capable of servicing European and North American markets within eight to 10 hours’ flying time.
Australia, speaking Spanish
“Argentina is essentially Australia, but they’re speaking Spanish,” he said.
“And they have masses of farmland development potential with less seasonal volatility.”
ANZ forecasts Argentina and Paraguay will rate just behind Brazil, Australia, India and New Zealand as the top net global exporters of beef in the next 10 years.
Despite its debt and bouts of high inflation – up to 24.5 per cent last year – the Argentine economy enjoys relatively high per capita gross domestic product, a diverse industrial base, and an export-oriented farm sector particularly strong in soybeans, wheat and maize production.
“Argentina’s not quite as sophisticated as Uruguay, but it’s a big agricultural economy and it’s something we’ll all be talking about a lot more,” Mr Whitehead said.
“A century ago Australia and Argentina were just about the world’s wealthiest countries.
“They’ve had some political and economic challenges since, but there’s a lot of potential growth we can expect to see catching us up.”
Even countries like Japan are starting to look at Uruguay because it’s a cheaper source of beef than Australia
- Michael Whitehead, ANZ
He said while the developing world’s appetite for beef and other high protein foods boded really well for Australian exporters, our rising Latin American rivals, including Brazil, were certain to be increasingly active and more sophisticated players in our backyard and northern hemisphere markets.
“Even countries like Japan are starting to look at Uruguay because it’s a cheaper source of beef than Australia,” he said.
Vietnam was another hungry market our beef industry should watch closely.
By 2026 it would outpace China and Japan to become the world’s biggest net importer of beef, tapping suppliers potentially well beyond its current Australian live cattle and processed beef trade sources.
Competition was the new normal.
Even Australia’s strength in the valued US grass-fed beef market was experiencing rising competition from Mexico, Canada and NZ.
“We shouldn’t be surprised by what we’re seeing,” Mr Whitehead said.
“Countries like China, Vietnam, Ukraine, India and Brazil have all shown us how nations can quickly come from almost nowhere to be huge importers, or exporters, of competitive beef or grain or horticultural foods.
“We need to pay attention and learn how our export opposition is shaping up, because they’re only going to get better at it.”
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
