Day 2: Mercado de Liniers and AACREA

By: Dylan Kitchen, Jordan Champion, Erica Rogers, and Justin Arnold

Yesterday, we visited the Mercado de Liniers in Buenos Aires.  It is the largest livestock market in the world, running over 10,000 head of cattle daily.  This market is unique in many aspects, including their shipping methods, sales approach, technological use, and economic impact. The auctions at the market are held 5 days a week, and buyers from all over the country attend. There are 55 brokers currently involved in the sale and purchase process, in total employing around 2,200 people.  This means that the market has an outstanding impact on the local community and economy.

The livestock auctions take place in a large grid of hundreds of pins, with the auctioneer walking above and throughout the pins with most of the buyers.  Herdsmen also move and evaluate the cattle, which are sold by the lot rather than individually.  Selling prices on Tuesday were around $0.80-$1.00 per pound.  After a sale, the cattle are moved to an electronic scale so that their final weight can be recorded before exiting.  The cattle are the full responsibility of the buyer from that point on.

The Mercado represents sales of 15% of Argentina’s beef supply.  Without this market, thousands of people would not have jobs or a way to conduct their business.  Although the market was chaotic and messy, it was still amazing to witness an important piece of the country’s beef price discovery.

Next, we headed to the Argentine Association of Regional Consortia for Agricultural Experimentation (AACREA).  This regional association of farmers, businesses, and corporations works to improve productivity, overcome industry challenges, and share useful research and information.  Members form groups of 8 – 12 led by a knowledgeable advisor and cooperate to tackle local farm business management issues.

Although AACREA requires paid membership to join, their research results are free to the public.  They have also implemented a program, EduCREA, tasked specifically with educating the local community about sustainable practices.  This is very beneficial because agricultural education is not nearly as developed in Argentina as it is in the United States.  The Association only represents 1% of Argentina’s farm population, but it is estimated that their work impacts over 50,000 people annually.

AACREA’s members are very advanced, with many certified agronomists serving as advisors and many professional members.  Over 60% of the members have a college education.  Membership is also showing increasing levels of corporate involvement, although 80% of members are still family farms.

CREA markets themselves as an association of businessmen rather than an association of farmers.  They have been instrumental in advancing agriculture practices in the country and in other territories.  As the organization grows and expands, so will Argentinian agriculture.

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Day 1: Let the fun begin!!

Alex Butler, Marisa Hendrickson, Zach Utterback, and Josey Moore

 

Our introduction to Argentinian companies began with Aceitera General Deheza, a company who specializes in the refinement of vegetable (soybean and peanut) protein meals, pellets, glycerine, and biodiesel. AGD has similar aspects to America’s Cargill because they are both involved with plant oil products on a large scale. One of the primary differences between the two companies resides in the fact that AGD is a vertically integrated company who grows some of its own product. The presentation at the company included a video, great powerpoint, and commentary by Carlos “Billy” Haeberle and his colleague, Santiago, who discussed various factors that contribute to the success of the company. The company is especially prominent in the soybean market seeing as it accounts for fifty percent of Argentina’s soybean meal and oil, but they are currently experimenting with expanding into the livestock industry, starting with swine. The company discussed how the government involvement in the agriculture industry is sometimes an asset and since they are able to negotiate prices with farmers quickly due to the extensive records the government collects about crops for taxation. On the flip side, the government’s instability makes attempts to be an international competitor challenging because of the frequent swings in political parties in office and their stance on reducing debt/increasing trade.

After our visit had concluded with AGD, we visited with the Schutter Group. Schutter is a significant player in supply chain management with locations worldwide. In the US, many of the services that Schutter provides for Argentina are provided by the USDA. These services include grading agricultural commodities and certification, in Argentina, those processes are provided by a privatized companies like Schutter. Schutter prepared a presentation for our group, which began with general information about trends in Argentinian grain markets and where they foresaw the market going; this covered topics such as the 1 million hectares being added to production and the historical corn crop that is anticipated. The presentation then went into information particular to Schutter, detailing all the countries they are involved in, their important markets, and what services they offer. After their presentation, we had an opportunity to network and discussed in-depth with them similarities and differences between the US and Argentina.

 

Before traveling to the Instituto de Promocion de la Carne Vacuna Argentina (IPCVA) we stopped to have a great lunch at the Galerias Pacifico Mall where we enjoyed some of the local eateries.  Once we were full, the group continued on to IPCVA where we discussed many of the intricacies of the Argentine cattle market.  IPVCA is similar to the American Cattlemen’s Association where they concentrate on helping farmers within the industry.  Farmers came together to build this institute because of the volatility and lack of knowledge of the cattle market.  Unlike the US cattlemen’s the IPCVA is only made up of 12 employees who take up approximately 5% of their total budget and a cattle herd of 52 million head.  Additionally, the IPCVA does a check-off like the US where every cow or steer that is slaughtered allocates a dollar to the institute, and they don’ t receive any money from the government.  This was one of institution we visited that is highly relatable to the US in many ways and was fascinating.

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The View from IPCVA

After our visit with the Argentine Institute for Beef Promotion, we hopped on a train and headed to the Congress building for a private tour.  The sheer beauty of the building was breathtaking. The palace they call it is a neoclassical style, utilizing materials from all over the world with elaborately furnished interiors. The Congress of the Argentine Nation (Congreso de la Nación Argentina) is the legislative branch of the government of Argentina. Similar to the United States Congress, Argentina runs a bicameral legislature composed of the Senate and the Chamber of Deputies.

Ordinary sessions span is from March 1 to November 30. The Congress is in charge of setting taxes and customs, which must be uniform across the country. It rules the Central Bank of Argentina, manages internal and external debt payment, and the value of a national currency (currently the Argentine peso).

 

congress day 1
Congress

Why study Argentina’s agricultural economy?

Dr. Todd D. Davis

The 1989 movie “Field of Dreams” has a moment where a ghostly baseball player asks Kevin Costner if this baseball park in the middle of a cornfield is heaven. Mr. Costner replies that it is not heaven – it is Iowa.  Based on general appearances it could also be Argentina.

I have had the pleasure of getting to know Argentina’s agriculture, agribusiness, and policymakers over the last fifteen years.  As a native Iowan, I have always been amazed at the similarities of the Argentine pampas with the rich, prairie soils of Iowa. Consider the photos of two soybean fields – one is from Argentina and the other from my family’s farm in Iowa. Can you identify which field is in either country?Picture2

At the farm-level, Iowa and Argentina are interchangeable. You see that both have flat, prairie soils. Both have adopted a no-till or minimum till glyphosate-resistant soybean production system. Both have very similar yield potential. Both farms have access to the same seed companies, chemical companies, and machinery companies.

Beyond the farm gate is where the similarities end. While in Argentina, we will visit with farmers, agribusiness, and policymakers to understand the factors that support US agriculture and those factors that limit or punish Argentinian agriculture.  The study of supply chains will help us understand the importance of a low-cost and efficient transportation and logistics channel to keep exports competitive in global markets.

We will also talk with farmers to learn more about how they manage their farm business. How do they finance their production? How do they manage yield risk and price risk? Are their supporting institutions like the Land Grant University system to help farmers with applied research and Extension information? How effective are commodity organizations or farm organizations in lobbying the Argentine government on behalf of the farmers?

This year’s course will be the fifth time I have taken students to Argentina. The personal and intellectual growth in both the students and instructors continues to amaze me. I am excited to share once again this learning experience with future leaders in American agriculture.

Last year’s visit witnessed the excessive late summer rains in Argentina that contributed to massive flooding and abandonment of corn and soybean fields on the cusp of starting harvest. The weather events in Argentina and Brazil in 2016 provided a much-needed boost to the US corn and soybean futures market. Will we see something similar this year?  The importance of the answer to that question is one reason we study Argentina’s agricultural system.

By the way, the photo on the left is from Argentina, and the photo on the right is from Iowa.

 

Vino. Vino. Vino.

March 21, 2016

By: Shelby Wade, Cori Green, Megan Harper, Lauren Nickell

After a once in a lifetime weekend filled with spectacular views and bonding with friends, today we had to get back to business. Today is our wine themed day or more commonly referred to as Malbec Monday by our group.  Argentina is famous for Malbec wine. We visited Catena Zapata Vineyards and Winery, Norton Vineyards and Winery, and Corporacion Vitivinciola Argentina. We sampled some of the best wines in the world ranging from Malbec to Chardonnay to a Cabernet Sauvignon / Malbec blend. The quote of the day is “wine a little, laugh a lot.”

Our first stop of the day was Catena Zapata Vineyards.  This is a 110 year old family owned company.  The first grapes were planted in 1902 by Nicola Catena.  Through the years the vineyard has been passed through generations and is now owned by his great granddaughter, Laura The family owns 3,000 hectares, of this 450 hectares are for Catena Zapata, and the remainder is for other projects.. In total, Catena Zapata has five vineyard. Catena Zapata is the most awarded winery in Argentina as their wine has been awarded over 500 times a score of a 90+ in the last five years and over 30 times above a score of a 95+ in the last five years. For context, a score over 92 makes a wine elite. In 2014 they were awarded 4th in the world with a score of a 96.6.  This contest takes into account several different bottles of the same type to test consistency and avoid judge bias. Their target market is the top 2.5% of wine consumers.

wine barrels

Laura is a medical doctor and studied abroad at Harvard and Stanford Universities.  At that time due to the ban of imports, citizens of Argentina were not able to try and compare wines from other countries.  Thus, she would collect international wines as she studied abroad and taste them in comparison to theirs. When her father Nicholas Catena would visit he would bring wine as well back to Argentina. (Side note: Nicholas also taught Ag Econ at Berkley.  He dreamed of having their wines known among the best internationally.) Today, her collection as well as the 2nd, 3rd, and 4th generation of the Catena Zapata’s wine is in the cellar of the 1960s Mayan influenced architecture building.

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The family has placed much emphasis on research at Catena Institute of Wine.  They do research and draw conclusions on their grape production methods and wine-making process, certification/validation of research, and publication of research.  They emphasize publishing information through journals in an effort for the whole industry to grow as a whole, not just Argentina or Catena Zapata wine industries.  Thus, they are the most published wine research institution in the world.

The soil profile has a large effect on the acidity vs. sugar ratio of the grape.  The soil profile, elevation, variety, and temperature have a large effect on the taste of the grapes.  Due to grape variety differences, Catena  picks grapes at different times throughout harvest to capture the different levels of sugar and acids. For fermentation they use oak ferment barrels, stainless steel tanks, and egg shaped concrete tanks. They have over 5,000 barrels that each have  a capacity of 225 liters. These are used for 4 years for aging and 6 years for fermentation. The barrels are washed 3-4 times a year to remove sediment and keep the environment optimal for fermentation. “Toasting” of the barrel is used to enhance flavor and give the wine structure. Catena has twenty types of wooden barrels from France and America forests that all give the wine a different flavor. They use 80% French barrels and 20% American barrels.

Catena tries to avoid replanting a crop of grapes. Instead they clone the best plants so they can keep the same genetics alive in the vineyard.  The older the grape plant the better as the quality of the grape improves with the vine’s age.  Low yield and high quality is gold for their production as it contributes to a scarce quantity of their premium wine.   In order to conserve water, they collect water that melts from the mountains.  They also use a drip system for efficient irrigation. In the high elevation crops (where the tectonic plates merged to form the mountains) the plants can draw nutrients and water from the calcium carbonate in the soil.

We had a quick lesson on taste testing wine:

  1. Tilt glass at 45 degree angle with white background and two fingers behind the wine to check clarity and intensity of color
  2. Smell the glass to get the aroma
  3. You move the class in a circle motion to get oxygen to the wine and then smell it again
  4. Taste it

The manager of United States Sales Department told us, “You can make bad wine from good grapes, but you cannot make good wine from bad grapes.”  Applicable to most areas of life; foundation first.

Our next visit was Norton.  Norton was very similar to the previous stop.  The visit was different in that they were more high tech and used steel hoppers for fermentation.  Their harvest season is also from February to April. It was very evident their target market is a very different from Catena with emphasis on mass quantities of lower value wine produced with less time in aging. .  Their fermentation bins hold between 24,000 and 36,000 liters; each batch is held in fermentation for 6-20 days. The tour guide took us down to the cellar that hold 500,000 bottles of wine. The oldest wine we saw was from 1935.  The dust from aging was a very unique sight to see.

Our last stop of the day was to Corporacion Vitivinicola Argentina in Mendoza City. There they discussed how they promote the wine industry. The wine industry lobbied Congress for a law that makes it mandatory for farmers to pay a certain amount of their revenue (a check-off) to this organization for market promotion and industry research. This company focuses on promoting small producers, specifically farmers that have 30 or less hectares which is equivalent to 75 acres. The law expires in 2020, by then their goal is to have $2,000,000,000 in receipts and 10% of the world’s market share. Right now, they have successfully reached their $2,000,000,000 goal, but currently have 3% of the world’s market share. There are 40,000 employees working in wineries, and 54,000 total workers employed by the wine industry.

After a fun filled day of experiencing the true culture of Mendoza, we finished the night up by walking 8 blocks down the road to a local favorite pizza restaurant. Most of us were still full from the T-bone steaks, potatoes, pumpkin, and carrots we had during lunch. However, we quickly conquered some cheese pizza and empanadas. With a long day ahead tomorrow on the road, sleep seemed to be the best option after dinner. Thank you Mendoza for the amazing wine, hospitality, beautiful scenery and amazing memories. Tomorrow we take on Rosario.

The big picture – The importance of quality and consistency in supply chains

March 17-18 (part 3)

Todd Davis and Tyler Mark

The third big picture topic from our visits with genetic and microbial suppliers is the role of having a high quality and consistent product in the supply chain.  We received a lot of information from all of our visits and this topic may have been presented in a more subtle way than the focus on genetics and business arrangements. It is still worth a few words to complete the picture from the last two days.

Rizobacter is concerned about quality and consistency throughout their production process. Rizobacter tests the quality of the inputs used to grow the microbials in the laboratory that will eventually become the seed treatment and other products.

Rizobacter also tests the quality of the treated product to ensure the same germination as prior to the treatment. The testing lab is an important part of Rizobacter’s business and their testing even statically validated that the shelf-life of their microbes was much longer than advertised. The ability to trace the product back to the production batch and date is also a way to maintain quality control and recall if a problem is discovered to pull product off of the market.

Dow seed also practices quality control throughout the production process. The seed is grown in a way to preserve the genetic lines and not cross-contaminate (complete with isolation from other corn/soybean fields and set-back from roads). The seed corn is harvested on the cob at 35% moisture and delivered to the plant directly from the field. Care is taken to slowly dry the corn without damaging, cracking, stressing the kernels.

The drying process can take up to 72 hours and much care is used to dry the wet corn slowly to minimize stress cracks and broken kernels which would be unviable seed. Dow has four large dryers, like the one on the left, which use either natural gas or LP. The diversified fuel source reflects the country’s uncertainty of which fuel will be available as urban areas receive priority over industry if there is a shortage.

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Dow has the ability to trace poor quality seed back to the lot bagged and even the field where the corn was produced is available through the seed label. This is important to maintain control over the product after leaving the seed plant.

CIAVT also practices quality control by testing each sample collected. Each bull provides two samples a day twice a week. For example, the class viewed the collection process CIAVT uses for beef and dairy genetics. Testing is performed to view the motility, health, and potency of the sample. The minimum standard is that 60% of the dose must be alive. This sample only had 56% alive and was rejected as a way to ensure a better quality and consistent product.

The Big Picture – The role of business alliances, partnerships and other arrangements in supply chains

March 17-18 (Part 2)

Todd Davis and Tyler Mark

A common theme emerged from our meetings with Rizobacter, Dow and CIAVT — these businesses identify and use several business arrangements to continue to grow and improve their company through increased market share domestically and globally.

Rizobacter uses multiple partnerships and alliances to broaden their presence in the market. For some products, they use strategic alliances with seed companies within Argentina and globally. Another business arrangement is where Rizobacter sells their technology under a different label. In other forms, Rizobacter provides their products as an input to a seed company and the seed is then branded and marketed with this value added seed treatment.  Rizobacter is a niche provider of microorganisms and has the quality reputation to be able to form these partnerships but maintain their own corporate identity.

CIAVT also stressed the role of business arrangements in the competitive market of beef and dairy semen. Their philosophy is that they preferred to be “colonialized but not conquered” by competition. CIAVT has the reputation in Argentina for quality and consistency as well as a focus on customer service. CIAVT has been able to defend market share even when foreign competitors enter the Argentine market for beef and dairy genetics. CIAVT uses partnerships with the US and EU to source the best genetics for use in Argentina and globally. As the US can’t export live animals to Argentina due to the Mad Cow restrictions and Argentina is restricted in exports due to Foot and Mouth disease, importing the genetic material is an efficient alternative.

AACREA started the group to the concept of sharing ideas among individuals that would normally be competitors (farmers in the land rental market) in a way to achieve mutual growth of ideas and skills. The visits with Rizobacter, Dow and CIAVT further taught this group that while business is competitive, sometimes the most profitable solution is to form business partnerships or strategic alliances for mutual gain.

The Big Picture – The importance of genetics in supply chains

March 17-18

Todd Davis and Tyler Mark

One theme from the last two days is the role of genetics in the supply chain. We saw this in the form of seed corn/soybeans, dairy and beef cattle genetics, and the thoroughbred industry.  The trip to Dow provided an opportunity to understand how seed companies harvest, dry, shell, bag and ship seed corn throughout Argentina and South America.  We talked about the role of technology fees in compensating technology companies for their research and development. Argentine farmers historically retain soybean seed so farmers do not pay the technology fees. As a result, some seed companies have attempted to collect from farmers at their first point of sales either at the local elevators or the export ports. This heavy-handed collection methods has eliminated any goodwill the farmers had towards this seed/chemical company.

Genetics is crucial with respect to the chemicals used in the production process. By visiting Rizobacter, we learned how seed treatments can be used to improve nitrogen fixation in the soybean plant. Rizobacter provides many type of soybean treatments designed to work with specific corn and soybean genetics that will improve the plant’s ability to use soil nutrients. As the technology improves, farmers may be able to reduce the quantity of chemicals and use seed treatments to meet the same production goals.

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There are thousands of microbials in the soil that have yet to be fully understood by agricultural microbiologists. This suggests an exciting future for this industry which may further change the production process by having farmers bundle seed technology with chemical and microbial products. Given the variability of soil types, the opportunity for site-specific prescriptive recommendations exists. The onus will be on farmers, consultants and Extension to understand the agronomic and economic potential of these bundled products

For the livestock industry, we visited CIAVT which is the largest cooperative in Argentina that sources beef and dairy semen. We learned how the dairy sector relies on AI for genetic improvement far more than the beef sector. The efficiency gains of genetics come from production systems that removes stressors from the cattle’s environment. Hence, the most productive dairy herds are in the US, Canada, Germany and Holland that have the ability to provide comfortable temperatures for the dairy cows.

Finally, the horse industry is an industry built upon advertising of genetics through the animal’s pedigree. The thoroughbred industry relies on the pedigree to establish premiums for horses; especially those animals with limited history on the track. This market is a niche and high-end market which makes the genetics particularly important as the pedigrees of the best horses are known among potential buyers.

For the livestock industry, we visited CIAVT which is the largest cooperative in Argentina that sources beef and dairy semen. We learned how the dairy sector relies on AI for genetic improvement far more than the beef sector. The efficiency gains of genetics come from production systems that removes stressors from the cattle’s environment. Hence, the most productive dairy herds are in the US, Canada, Germany and Holland that have the ability to provide comfortable temperatures for the dairy cows.

Finally, the horse industry is an industry built upon advertising of genetics through the animal’s pedigree. The thoroughbred industry relies on the pedigree to establish premiums for horses; especially those animals with limited history on the track. This market is a niche and high-end market which makes the genetics particularly important as the pedigrees of the best horses are known among potential buyers.