Avoiding the Food Price Bubble in Argentina

by Dave


in other parts of the world, where cash crop agriculture is integral to the economy, the soaring fuel prices have triggered something of an economic boom. And nowhere has this boom been more pronounced than Argentina, one of the world’s largest soybean producers. But if the gains from this boom are not properly reinvested, the country could just as quickly find itself in a crash as precipitous as its rise was meteoric.

With applications ranging from biofuels to seasonings to protein food bases products, soybean demand has brought on record prices—currently $660 a ton. As you might expect, this has spurred many Argentinean farmers to dedicate more land to soy, and less to other traditional staples such as corn crops, fruit groves, and cattle cultivation. This trend toward monoculture brings on risks both economic, such as recession in the face of a price drop, and biological; a blight.

If the fruits of today’s current soy boom are contribute to Argentina’s long-term economic future, some of the profits must be reinvested into the agricultural infrastructure to ensure lasting productivity. A moderate windfall tax on soybean crops could fund a subsidy to incentivize farmers in other markets to continue production of non-soy crops. Requirements that large-scale soy operations employ local labor, rather than displacing already impoverished farmers with increased mechanization, could reduce the spread of poverty and the release of greenhouse gases.