Provincial and federal officials in Buenos Aires province are still determining how best to handle the relief effort for farmers and landowners after heavy rains in August and September caused widepsread flooding. According to (provincial) Minister of Agricultural Affairs Gustavo Arrieta, around one-third of the region is affected by the problem.
Landowners in the area have already lost more than $3,5bn due to flooding. According to provincial governor Daniel Scioli, the rainfall in the first eight months of 2012 already doubled that registered throughout the whole of 2011.
Arrieta highlighted the work of Scioli and the provincial government, urging everyone “to keep the channels of communication open in order to meet the maximum technical and administrative deadlines.”
In September, Scioli said the government would attend to all flooding emergencies and promised “a cutting-edge engineering project that will bring predictability and resolve the difficulties generated by the flood water.” He also declared tax relief for those worst affected, and urged the Provincial Bank to study new lending tools so that the provincial sector can have greater flexibility to address the crisis.
Producers with more than 60% of their land underwater can in no way meet their typical fiscal obligations because of the loss of crop, future crop, pasture, feed preparation and death of livestock meant for breeding or dairy, according to Clarín.
Calculating the Response
Farmers want Scioli and President Cristina Fernández de Kirchner to sign two separate decrees that allow those affected by the flood water access to further tax breaks to relieve the financial burden caused by this year’s floods in the short term. They are also asking the government to take a look at the Rio Salado and come up with a way to better handle water runoff during periods of heavy rain.
However, complicating the relief effort are the distinct definitions of ‘disaster’ and ‘emergency’; the state of crisis in which a property is found will determine what type of support it is able to receive.
For example, the proposed tax exemption will be granted to properties in ‘disaster’, where 80% of production has been lost due to flooding. Producers in a situation of emergency may extend the payment period of debt and taxes, while those categorised as disaster will have a much longer time to pay the bank.
A commission with Land Affairs will evaluate which cases are categorised as emergency, disaster or both. It will depend on a statement that each municipality will submit regarding the flooding in its territory. “Each producer concerned should fill out a simple affidavit to qualify for the mechanism of emergency or disaster, as appropriate,” Arrieta said.
However, some farmers are worried about the use of different levels of crisis. Alejandro Gomez Bradley, a farmer working in Las Flores, in the centre of the province, discounted the government’s categorisation of emergency and disaster, saying that the entire situation is a disaster.
“An emergency is when you have to move the animals to another location, this is a disaster,” he said. “There are people who have lost 100% of their animals, all of their cows have died.”
In Las Flores, Gomez Bradley said ideally there is one cow for every hectare of land. Because of the flooding, his closest neighbour has up to 400 cows in only 8 hectares of land, the hectares that are not flooded.
“If this is not disaster, I don’t know what is,” he says. Corn was supposed to be planted on his land this September, but the ground was far too wet. “It is impossible to plant this year. The land is far too humid, it is ruined,” explains Gomez Bradley.
Without the help of neighbours and the surrounding community, many producers would not have been able to survive this year, according to the farmer.
“If we did not help each other out as neighbours, nothing would happen,” he said. “We help each other with tractors, the ones who are not affected help the ones who are. The government has a lot of words, but no action.”
Gomez Bradley said that while the tax extensions may help in the short term, farmers will still suffer in the long term when they have to pay taxes after a season of serious loss.
The Food Spillover
Given the importance of Argentina as an agricultural producer, the damage to livestock and crops this year – and the potential impact on next year’s harvest – could have repercussions in local and even international food markets.
This is especially so given that low crop production has also been a problem in the US this year with 26 states suffering natural disaster in July. Monitors recorded that 56% of the country is experiencing drought. The drought situation paired with an extremely violent wildfire season left only 40% of the crop in good condition, according to USDA.
Because of the US drought, food prices have already risen significantly, according to the Chicago Board of Trade (CBOT). Prices for both soybean and corn have soared past the previous records set in 2008. As of September, soybean was priced at US$690/ton, a US$40 increase. Corn was priced at US$350/ton, a US$30 increase.
Ernesto Vázquez, food producer from Córdoba, said, “America is the strongest player in the world trade of corn, so markets are very sensitive to what happens there.”
Vázquez added that for soybean, Mercosur is considered the most powerful. Since much of the US crop is unusable, crops from Argentina will be all the more valuable. This season’s flooding could therefore drive food prices even higher.
To add to food price problems is the growth of total world consumption, which is growing at a rate of 7,000,000 people/month. CBOT statistics estimate that by the end of the year, the world will have 28 million more consumers, or 230,000 more mouths to feed every day.
The sharp movements in food markets can also be exacerbated by speculative behaviour. For example, according to La Nación, food producers in Argentina are not selling their crop today as they know it will be worth more tomorrow.
While total crop losses are still unknown, the flooding in Argentina remains a serious problem, both in rural areas and cities. Governor Scioli said urban areas have priority of flood relief because they are more of a humanitarian concern.
Arrieta said that the committee is looking at the number of affected producers so that is can properly arrange assistance. He anticipates that the Provincial Agricultural Bureau will reconvene during the first week of October.
For farmers like Gomez Bradley, who remain doubtful about government action and the timeliness of relief, the main hope is that more heavy rain does not arrive in the meantime.
Find out what locals think about the government’s response to the flooding here.