NEW MEDIT N. 2(2002
Limitations for competitiveness
in Argentinian sunflower agrifood chain
HUGO CETRANGOLO, MANUEL CARLEVARO, SANDRA FERNANDEZ*
system, consequently
suffering the effects of
Soybean
cultiva- Argentina is today the first sunflower oil producer and exporter. Its competitiveness global changes. It is dition, which emerged relies on being highly efficient in the primary production and industrialization rectly affected by sevin Argentina at the stages. However, this sector is threatened by several implemented mechanisms that eral factors like world
distorted the international market. This paper presents an updated overview of Arbeginning of the sev- gentinean sunflower agrifood chain situation, describing primary production, in- sunflower oil stocks or
enties, partially re- dustry, commercialization and main mechanisms that limit its competitiveness.
its substitutes, internaplaced grains by
tional prices, protecResume
oilseeds, as well as intion barriers and imtroducing a pattern L 'Argentine est actuellement le principal producteur et exportateur d' huile de tour- port taxes utilized by
change in the compo- nesol. Sa capacite de competition est basee sur la gran de efficace de sa production many countries. T 0sition
of
whole primaire et son industrie. Pourtant, le secteur se trouve menace par l'existence de me- day the oilseed sector,
divers qui compliquent le marche international. Dans ce travail on presente
oilseed produced to canismes
une analyse actuelle de la chafne agroalimentaire du tournesol en Argentine, et on which is the main valthat
moment decrit les aspects concernant la production primaire, /'industrialisation, la commer- ue creating sector of
(Casaburi
et
aI., cialisation et les principaux mecanismes qui limitent sa capacite de competition.
Argentinian
trade,
1998).
faces the challenge of
With the growth of
maintaining its share
soybean crop and sunflower expansion, a processing sub in an international market distorted by a series of mechasector evolved for being one of the most competitive of nisms that difficult an efficient functioning of worldwide
Argentina. In the seventies this industry was constituted trade {Lattuada, et aI., 1999}.
mainly by medium-size national firms, with a productive
The paper is organized as follows: firstly we present an
scale lower than international competitors. The high overview of main productive aspects. Then, we describe
rentability period which was the cause of the initial fast the industry situation and some commercial issues. Next
growth stage changed market structure, stimulating the a SWOT (Strengths, Weaknesses, Opportunities and
entrance of multinational grain trade firms in this busi- Threats) analysis was performed in order to study the Arness. Firms significantly increased their productivity and gentinian competitiveness. Finally, we analyze some disaverage plant size, focusing their activity towards expor- tortive mechanisms that affect Argentinian sunflower atation. In this process, the industries concentrated in two grifood chain competitiveness.
products: soybean and sunflower, which today represent
52 and 30% of the oilseed milling, respectively.
At present, Argentina is the first sunflower oil produc- 2. Productive Aspects
er and exporter. Approximately 90% of harvested sunTotal grain area sowed in Argentina for the period
flower is processed in oil extracting factories. From the 2000-2001 was approximately 25.5 millions hectares, 53%
total oil production, 25% is destinated to domestic market of them corresponding to oilseeds and the rest 47% to ceand the rest is exported. In the last years, considerable in- reals. Among the formers, soybean represents the 41.8%
vestments were made in order to increase the milling ca- while sunflower the 7.8%. Considering only the area
pacity and storage and to improve port facilities. Local planted with oilseeds (13.3 million hectares) the percentoilseed industry of high technology has the higher growth ages changes to 79.3 and 14.8%, respectively. Figure 1
index among the main oilseed world producers.
shows the changes for total planted and production of
Oilseed complex is basically a commodity exportation sunflower. It can be appreciated the yield increase in the
last thirty years.
Sunflower is cultivated all around Pampean Region, ex* Agribusiness and Food Program, Faculty of Agronomy, University of tending to the Chaco Province. It adapts to many soil and
1.
Introduction
Abstract
Buenos Aires
34
NEW MEDIT N. 2/2002
agroecological condifactors such as hailFigure 1. Changes in the planted area and sunflower production. Source: SAGPyA.
tions, and for that
stone, strong winds
8000000r----------------------------------------------------,
and freeze; biological
reasons is displaced
factors like pests,
to zones with lower 7000000 r-----------------------------------birds, hares and inproductive
condisects, and other cultions, leaving the better soils for corn and
tural practices related to inefficient mesoybean production,
which frequently has
chanical harvesting I
higher rentabilities.
and erroneous harFigure 2 shows a
vest planning.
map of Argentina
Although
sunwith the main sunflower is not the
main oilseed cultivatflower sowed area.
Sunflower has a
ed in Argentina, the
spring-summer cycle,
country is the main
l000000tL~~~~~~--------------------------~~--~~~~
-+-- Area harvested (ha)
changing
sowing
world seed producer,
-'-Produdion (ton)
time according to
with a total of
...,
...,
""~
r::: '"
er:
R
"""'"
'"
'"
productive
region.
""3.187.943
metric
""""""""".,."- "-"- ~"'" '".,. '"
""'"~ ~ ~ ~ ;;!;~ ~~ ~~ ~ ~ ~ '"~
tons
in
the
For example, for
~
~
~
Campaign
Chaco and North
2000-2001 campaign,
constituting the 13,8% of
Santa Fe, sowing fluctuates
from the second half of August Figure 2. Main sunflower sowed area
world production. This fact
and the first of September. For
suggests that Argentina should
have a strong influence in seed
North Pampean Region, that
price formation. However, this
comprises the east of Cordoba,
does not occur, as 90% is incentre and south of Santa Fe
and Entre Rios and center and
dustrialized for obtaining byproducts such as proteic meals
north of Buenos Aires, the optimal sowing date is between
and vegetable oil, which are
commercialized as commodiSeptember and October. For
ties in direct competition with
the case of South and Western
Pampean Region, east of La
other oilseeds like palm and
soybean.
Figure 3 depicts the
Pampa and San Luis and center
evolution
of world sunflower,
and southeast Cordoba the
soybean
and
palm oil producsowing schedule begins in Oction
in
the
latest
years. It is evtober with the aim of avoiding
ident
that
while
soybean and
freeze.
In general terms, the optimal
palm oil production has increased, sunflower maintained
sowing density ranges from
its level, which means that in
40.000 to 70.000 plants/ha,
relative terms sunflower oil has
with maximum yields which
lost importance.
rarely overcomes 3.000 kg/ha.
It is considered as a threshold
yield a value of 42% of oil, low3. Industrialization
er yields suffers a price reducOilseed industry has evolved
tion, while higher values gets
since
the seventies according to
bonus payments. This considthe
rate
of raw material availerations account solely for stanability,
since
it represents 80%
dard sunflower, which is the
of
by-products
production
most cultivated, as for high oleDuring
the
first
years the
costs.
ic sunflower the situation is difgrowth
was
led
by
the
primary
ferent.
sector,
and
only
at
the
end of
The factors that affects sunthe
eighties
the
milling
capaciflower cultivation are diverse,
ty was sufficient for processing
including climatic originated
600000O
C)
N
00
00
C)
N
00
00
00
00
C)
35
N
NEW MED!T N. 2/2002
the huge grain
4. CommerFigure 3. World sunflower, soybean and palm vegetable oil production. Source: FAO
volume that is
cialization
produced nowa30000
Once the raw
days.
material
IS
The majority
processed
the
of the processing
25000
manufactured
facilities are near'"
c
.-l
'"
~
by-products are
by
productive
".--'1;20000
storaged
until
zones and ports,
..,'"c
."",.,-""distribution and
reducing in this
"'
~
final sale. These
way transporta§'" 15000
o
activities
are
tion costs. This
s:
e
done
c
by
industrifact constitutes
0
'ti 10000
al plants, includan advantage that
:>
.....
..,
'"'
'"'
ing
the delivery
the subsector has
0
-+-Sunflower
~
to
port,
onboard
maximized, as it
-5000
_Soybean
loading and othcurrently
con......-Palm
er operative extrols the transo
port
stages. In
port and storage
1995
1996
1997
1998
1999
2000
2001
771 and
1999,
stages, from grain
Campaign
128
million
dolreception to on
lars
sunflower
oil
board
loading,
and
meal
wen:
optimizing logis- Figure 4. Sunflower oil and meal production. Source: CIARA
exported to var·
tics operation.
3.000
ied destines, re·
Today
there
spectively.
Be·
are 24 processing
IBOil I1
Cl
Meal
tween
1994
and
sunflower plants
2.500
1999, 77 counin active functries imported at
tioning,
being
2.000
least once crude
many of these
or refined sunmultipurpose faIn
flower oil from
cilities, cap abies
~
C
o 1.500
Argentina. Durof milling sun~
I'"
ing
2000
flower, soybean
E
1.000
1.556.258
sunor corn adapting
flower oil tons
to different harE
were exported to
E
vest time. From
500 MO
68
countries.
that plants, 10 usE
However, 68%
es solvent extracwere destinated
tion and 14 a
0
1~1~1~1~ 1~ 1m1m1~1~1~ 1m1m1m~
only to six councombination of
79
89
tries:
India
both solvent ex(32%),
Iran
traction and conCampaign
(14%), Benelux
tinuous press systems. Final products are vegetable oil and proteic meals. (6%), South Africa (6%), Russia (6%) and Brazil (4%). It is
In the last three decades, more than 90% of total produc- important to stress that the main import countries have
tion was destinated to milling, being the rest used as seed changed considerably in the last years. Argentina has lost
or exported. During 2000, 22.209.588 oilseed tons were important markets like Mexico, Venezuela and the Unitprocessed, being 5.060.055 (23%) tons sunflower, preced- ed States, and won others such as India, that in 1994 was
ed by 16.951.952 (76%) tons of soybean, and the rest cor- not a buyer and during 2000 converted into the main
responding to peanuts, cotton, linen, safflower and rape- crude sunflower Argentinian oil importer.
seed oil. As a result of this processing, 2.117.190 tons of
sunflower oil were obtained and 2.079.286 tons of sun- 5. Competitivity analysis of sunflower
flower meals. Fi-gure 4 indicates sunflower oil and meals
agrifood chain
production in the last 30 years.
An analysis of strengths, weaknesses, opportunities and
-
-
-
'F
~
ntV'I
I\I\n
ntV'I
nI\I\
d
36
NEW MEDII N. 2/2002
threats (SWOT analysis) has been
ities. This fact determines an almost
Figure 5. Principal importers from Argentina duperformed for the sunflower agrinull increment in crop productiviring 2000. Source: SAGPyA
food chain. This study divides the
ty. In the primary production stage,
analysis in two parts: an inner part,
there is a low risk management.
that comprises primary production,
Another weakness is that the sunindustry and comercialization, and
flower oil is limited to alimentary
usage, without diversification. Bean outer part: the environment
where the chain is embedded. Table
sides, there is no promotion of ArI summarizes the main items that
gentinian sunflower oil in internaare involved in the analysis.
tional markets.
The availability of new hybrid deIn the inner part we found the
strengths and weaknesses, and in
velopments like seeds with different
the outer part, composed by the
fatty acid concentrations gives a
good opportunity to expand the
world market and trading countries, opportunities and threats that
sunflower oil uses to several areas
14%
affect sunflower agrifood chain are
such as cosmetic and lubricants.
6%
South Africa
Benelux
presented. This analysis allows to
Another promising perspective is
6%
6%
elucidate the actual situation of the
the use of sunflower oil in biodiesel
chain into the world context.
production. The implementation of
With respect to the strengths, the natural resources and national and international marketing policies gives a good
climate makes that material for the industry to be abun- opportunity for accessing to new markets with refined
dant in Argentina, and these facts provide a solid base for and packaged oil. Another opportunities come from the
sustaining the next steps of the chain. In turn, industry lo- by-products development like margarine, mayonnaise
cates the plants near to the primary production areas, and and food products, and from the use of soybean oil for
ports, optimizing logistics operations and lowering trans- biodiesel production, generating a space for sunflower oil
portation costs. Furthermore, Argentinian industry is one penetration.
The main threat that faces the sunflower agrifood chain
of the most efficient in the world, having the best technology available, with commercialization and shipping is the artificial competition due to protective mechanisms
stages vertically integrated. Also, the -oil produced has implemented by trading countries. The international
prices are at the lowest level in the last twenty-three years,
high quality.
Referring to weaknesses, the low efficiency in commer- reducing the benefits of all chain components. The palm
cial stages due Table 1. SWOT analysis ofArgentinian sunflower agrifood chain
to the critical financial
situaOuter
Inner
tion is a serious
Oppo nunities:
Strengths:
problem. The
Availability of new hybrid development with
Comparative advantages derivoo from natural
poor regulatory
different fatty acid concentrations.
resources.
function of the
Use of soy bean oil for biodiesel production.
High quality of sunflower oil
Argentinian sAccess to new markets with refined andenvased
• Optimal location of industrial plants.
tate causes high
High efficiency of Argentinian industry.
oil
indirect
and
World's demand growth of vegetable oils and
Efficiency in commercialization and onboard
structural costs
by-products developments.
loading stages.
in all transacPe rmanent technological updates in industry.
Strong positioning of" Argentinian Sunflower
tions along the
Oil" mark.
chain. In spite
of the imporThreats:
Weaknesses:
tance of the
Low efficiency in comme rcial stage.
• Decreasing tendency of international prices.
oilseed sector in
High impact of subsidies and tariff systems in
• Insufficient resourres destinated to research and
Argentinian sunflowe r agrichain
Argentina,
development activities.
competiti veness.
Oil usage in food industry almost only.
there are only
• Strong competitivity of palm oil.
• High structural and indirect costs in prod uctive
few advances in
Inefficiency of domestic tax system.
and industry sectors.
research and deAlmost null increment in crop productivity.
• Productivity growth in soybean crop.
velopment, due
Insufficient depth of the ports.
Low risk coverage .
to the scarce reAggressive commercial policies of competitor
• Absence of sunflower oil's promotion in
sources destinatcountries.
international markets.
ed to such activ-
B~IR~~
·
·
··
··
·
··
·
·
·
··
·
·
··
37
NEW MEDIT N. 2/2002
(Ketelhohn et. aI, 1998). Besides, the oilseed complex has
lower transportation cost due to the nearness of ports,
high technology, even superior to its main competitors,
advantages derived from scale economies and vertical forward coordination. As a result, Argentinian oilseed industry has a maximal efficiency in the worldwide scale.
However, the sector faces today two main exogenous
negative factors: international prices fall (to the lowest
level in the latest 23 years) and the full activation of protective
mechanisms in the world trade community. Dis6. Limitations to competitiveness
torted mechanisms promotes importation of oilseed
Comparative advantages derived from natural resources grains and increase vegetable oil costs of purchasing. This
are the key issues that construct the Argentinian high reality favours "artificial competitors" to the detriment of
competitiveness, having the higher yield per hectare in natural efficient productors. Approximately 30% of sunthe world. Cost per hectare in Argentina is 25% lesser flower oil is generated by producers supported by public
than in the United States and 20% lower than in Brazil policies (M&S Consultores, 2000). High protection levels,
,-----F-igu
- r-e-6-.E
- v-o-lu- t-io-n-o-f -F-O-B-(A
- rg-en-t-in-ia- n- -po-rt-s)- a-n-d- F-'A-S-(.-73-uen
- o-s A
- ir-es-p-o-rt-y -pr-ic-e-s o-f-s-un-.--, in the form of tariffs, continued to be the
flower seed. Source: Mdrgenes Agropecuarios (2001)
major restrictive factor for agricultural in300
ternational trade. The main difference between the mean average of these tariffs
280
makes that, while producers are benefited
in
protective countries, the ones belong260
ing to non-protective countries experi240 ment income reductions because of the
c 220
minor resulting prices (Burfisher et aI.,
0
2001).
..... 200
Figure 6 shows the FOB sunflower seed
*;:)(/) 180
prices changes in Argentinian ports and
F AS changes in Buenos Aires port and
160
Figure 7, FOB prices in Argentinian ports
140
and CIF prices in Rotterdam.
It can be observed that the trend is sim120
ilar in both cases, because the 80% of sun100
flower oil production costs correspond to
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
the main raw material, which is the seed.
There are many factors that converge to
Figure 7. Evolution of FOB prices in A rgentinian ports and CIF Rotterdam prices ofsun·
produce this price fall, among them the sflower oil. Source: Mdrgenes Agropecuarios (2001)
tock/ consumption ratio and benefit implementation for production. Another
800
factor that contributed to the current
low price levels is the significative
70° t-----------------~~--------~~~~~~1 growth of palm oil production during
the nineties, mainly in Malaysia and Indonesia.
c
Respect to protective actions, these
o 500 +-~-----~~------~-----~~----1
mechanisms
are implement both in the
C l)
W 400+-----~L---------------------~~~--1 main producers (United States, European
:)
Union, Brazil, Hungary, Rumania, etc.),
300 +-------------------------------------------------1 in the main importers (China, Iran, Egypt, India, Iran, European Union,
200 +-------------------------------------------------1 Japan, etc.) and in many others like Mexico, Chile, Eastern Europe countries, etc.
100+-------------------------------------------------1 in the form of directs benefits to production, highly effective protective systems,
0 +----,---,----,---- .---.----.---,----.----.---,-----,1 import quotas and even price bands. This
oil production growth represents a strong competltlon
for sunflower oil, and also competitor countries implement aggressive commercial policies. In the local context,
the productivity growth of soybean crop is the cause for
its preference among producers. The depth of the ports is
insufficient and the domestic tax system is inefficient.
These facts constitute important threats that affect chain
competitiveness.
-
-
1990 1991
1992 1993 1994 1995 1996 1997 1998 1999 2000
38
NEW MEDIT N, 2/2002
interventionism alter the market natural adjustment, leading to a world supply excess of products derived from the
oi~s~ed complex, within a frame of prices and rent ability
portations, the lesser value adding and the market loss
places the oilseed complex in an emergency situation. In
Figure 8 it can be appreciated that in spite of the increase
cnSlS.
of total crude sunflower oil exportation (in tons), the valIn the case of sunflower oil, the eighties decade was ue creation decreased because of the international prices
more dynamic than the nineties, when the rhythm mod- fall.
In the case of refined sunflower oil, the trend is differerated. The growth promoters for vegetable oil production were Turkey and India in Asia, and the European ent than for crude oil, as not only the value creation deArea. The artificial competition generated by these coun- creased but also the export quantities were lower as well.
tries currently constitute more than 30% of world supply, This fact is shown in Figure 9.
surpassing the supply of Argentinian industry (24%).
A clear example of protective measures implementaWorld market dependence and its present distorted tions is the United State case. This country has mainstructure creates big difficulties for the Argentinian in- tained a complex system of benefits and support mechadustry. Reduction in crude and refined sunflower oil ex- nisms for agriculture and related industries. The applications of marketing loans and loan deficienFigure 8. Changes in crude sunflower oil exportations, in quantity and value creation.
cy payments makes that the sowing deciSource: CIARA
sions favour soybean over cereals. This important fact directly affects sunflower as in
1,800.000 , - - - - - - - -- - - - -r - - - - - - - - - - - - - - - ,
CVaule creation in thousands of US$
the end the final product is a commodity:
Il!IExported tons
1,600,000
vegetable oil.
~---------~
Another case to highlight is the Euro1.400,000 +-- - - - - -_+.
pean situation, where since 1962, with the
application of Common Agricultural Poli1,200.000 +-- - - - - - cy (CAP), benefits has been utilized in a
major scale as a protection for domestic
1.000,000 ~-------markets. The European Union is simulta800.000 +-- - - neously the main world food importer and
a relevant exporter of a big quantity of
600.000
tempered-climated agrifoods. At the same
time, the European Union is in a paradox400.000
ical situation of being the major market for
Argentinian
agrifoods, and the origin of
200.000
the biggest hindrances and distortions that
affect Argentinian foods. For the sun1993
1994
1995
1996
1997
1998
1999
2000
flower complex, the European Union is today the main destination for sunflower
~-------------------------------,
seed exportation (98%). During the
Figure 9. Changes in refined sunflower oil exportations, in quantity and value. Source: CIA·
last decade the behaviour was similar
RA
with values close to 80% (except for
1997). The same occurs with meals,
CValue creation in thousands of USS
which absorbs 80% to 100% of Argen2W.000 ~~a~E~
xpo~rted~~to~ns~-----t----------------_j
tinian exportations. When considering
sunflower oil, purchases from the European Union have shown a variable
200.000 ~-----------behaviour, constituting between 2 and
15% of the exports. The percentage
1W . OOO +---------~
evolution of sunflower complex sales
done to the European Union is shown
in Figure 10.
1oo.000 ,L-.--.'
Ukraine is another country that
through import rights for crude and
refined sunflower oil, and export
W,OOQ
rights for sunflower seeds, has protected its industry gaining new markets
previously supplied by Argentina, as
°
°
1995
1996
1997
1998
1999
39
2000
NEW MEDII N. 2/2002
Figure 10. Percentage evolution ofsunflower complex sales to European Union. Source:
Halliburton (2001)
120
100
80
60
----~~-----
~
....
\
40
20
A
A
A
0
1993
1994
1995
..----. ..r
----
--.-~
......
---.
/
-+-Seed I--
\ L
Y
..
A
A
1996
1997
1998
I
___ Meal
A
Oil
I--
A •
A
1999
Algeria and Egypt. Is important to notice that in this case
there is a big difference in yield per hectare between
Ukraine and Argentina (1.24 and 1.75 tn/ha, respectively)
according to estimations of Oil World. Similar measurements have been adopted by Russia, Kazakhstan and Belarus.
Sunflower oilseed sales also lost Mexico and Venezuela
markets, where the North American production partially
substituted (in the later case) and almost displaced completely (in Mexico) Argentinian vegetable oils. Venezuela
used to be the main Latin American exportation market
for vegetable oils, but since February 2000, this country
established quotas for importations of all types of vegetable oils, regardless country origin, resulting such quotas insufficient for Argentinian sunflower oil exports. On
the other side, the penetration of Argentinian vegetable
oils in Mexico (where the country has assigned quotas)
has been displaced by the United States competition since
the incorporation of Mexico to NAFTA.
Also the Chilean market has taxed crude and refined
Argentinian vegetable oil importations, while agreed with
Bolivia to import tax-free vegetable oils, consequently affecting Argentinian exportations.
2000
Argentinian competitiveness are: restricting importation quotas, that limits the
commercialization of elaborated products
such as sunflower oil and meals; supports
from different sources to local oilseed
complex production which increases production with market artificial signals and
generating a strong pressure of offerings;
preferred commercial regime and price
sustaining mechanisms.
In this context, Argentinian industry is
positioned in a critical situation, that
needs an immediate joined public and private action, aimed to set strategies and
policies tending to improve conditions
for sunflower complex development, in
order to cope with current distorted markets. Two possible initiatives are the
strong investment in research and development, and intensive promotional activities for a better positioning in the international market.
Aknowledgements
We are grateful to Dr. Javier Quagliano for his help to the preparation of this manuscript.
Source data:
• Secretary of Agriculture, Fisheries and Food of Argentina (SAGPyA
- www.sagpya.mecon.gov.ar).
• Argentine Oil Industry (CIARA - www.ciara.com.ar).
• Food and Agriculture Organization of the United Nations (FAO www.fao.org)
References
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oils: Argentinian sunflower industry analysis. Unpublished diploma thesis, University of Buenos Aires (in Spanish).
Halliburton, Wenceslao (2001), Competitiveness of Argentinian oilseed
complex: The impact of distortive mechanisms of international markets.
Unpublished diploma thesis, University of Buenos Aires (in Spanish).
Ketelhohn, W .; Moncayo, M.; and Allen, B. (1998). Competitiveness in
Latin American oilseed industry. INCAE Publications.
Margenes Agropecuarios Journal (2001), Historical review 2000 (in Spanish).
M&S Consultores (2000). International markets distortions in Argentinian oilseed complex. Buenos Aires (in Spanish).
Lattuada, M., Farruggia, O. y Guerrero, I. (1999). Argentinian oilseed
complex. Ediciones del Area, Rosario, Argentina (in Spanish)
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7. Conclusions
Argentina occupies a strong position in the international frame, leading the market of oilseed products and being
the first sunflower oil and meal world exporter. This sector, which is the major share of Argentinian exportations,
has inserted in the world market due its high competitiveness and efficiency.
However, Argentina compete in a highly distorted market and with even more active artificial competitors.
Some of the most important factors that negatively affect
40