Trying Times: Argentina’s Food and Agriculture Sector During the COVID-19 Crisis

As the coronavirus spreads across the globe, it is forcing world leaders to tread on unfamiliar territory. Starkly different strategies are being employed to manage both the virus and the economic wreckage left in its wake. Only time will tell what the optimal path through this crisis would have been. For the meantime, however, I believe there is value in understanding the approach that different countries, and especially their food and agriculture industries, are taking to confront COVID-19.

In Argentina, where I reside, the government has quickly taken drastic measures to contain the virus. Given the relatively delayed arrival of the coronavirus to the region, leaders in Latin America were given the opportunity to observe the situations in Asia, Europe, and the United States, and craft their reactions accordingly.

Argentina announced their first positive case of coronavirus on March 3, 2020. Just over two weeks later, on March 19, 2020, the government announced a sweeping national quarantine. Originally in place through the end of March, the government decided to extend the quarantine through April 12, 2020, in part to limit the movement of people during the long Easter weekend. The quarantine is being enforced with significant police muscle and violators can be fined or even jailed.

Of course, there are significant economic consequences for a country choosing to essentially shut down for nearly a month. Indeed, we have seen governments around the world flounder with the tradeoff between protecting public health and maintaining economic performance. However, Argentina’s already precarious economic situation leading into the crisis likely made this decision easier for President Alberto Fernández. In fact, I expect his quick, unilateral action will ultimately win him public favor and at least temporarily extend the population’s patience with his efforts to right the economy – one of the key promises made during his election campaign last year.

Even during a national quarantine, basic services still need to be made available and to this end the government published a list of 24 groups that are exempt from the quarantine and expected to function as normal. Four of these relate directly to the food and agriculture industry. While Argentina’s food and agriculture sector has shown incredible resilience thus far, challenges at each step of the value chain are beginning to bubble to the surface. It will be critical to address these issues swiftly to avoid disruptions in the production of food, feed, and fiber in the country.

Down on the Farm

The COVID-19 pandemic has hit just as Argentina’s grain harvest was beginning in earnest. Industry stakeholders estimate that about 5% of the soybeans and 16% of the corn had been harvested at the end of last week. As such, it is critical that agricultural activities related to the harvest not be impeded or delayed.

Agricultural groups have generally been supportive of the national quarantine and respectful of their exemption. A commission made up of leaders of different agricultural entities formalized its support for the measure and has encouraged producers to use the exemption, “only for tasks that cannot be delegated, postponed, or which are indispensable.” Furthermore, INTA, the National Institute for Agricultural Technology, has released special guidelines for producers to limit their potential exposure to the coronavirus. This list includes recommendations such as sanitizing shared equipment, minimizing face to face contact, and limiting interactions with high risk individuals.

The largest challenge that the agricultural sector appears to be facing is disruptions related to transportation. Even though the national quarantine decree has exempted truck drivers that move agricultural inputs and goods, some municipalities have enacted stricter policies, essentially barring truck drivers from entering their borders. These restrictions are preventing trucks from accessing grain scales, making deliveries, and completing tasks required to support agricultural functions. Approximately 90 municipalities have these restrictions in place and although agricultural firms and the government are keen to find a solution, they are running up against significant local resistance.

Shop ‘Til You Drop

One of the most fascinating things about the coronavirus pandemic is the remarkable and immediate shift it has had on consumer purchasing behaviors. Delivery services have supplanted dine-in foodservice options. Meanwhile, more consumers are buying food items online. Delivery times for groceries purchased online have stretched to over a week for the most popular grocery chains in Argentina.

As in many parts of the world, confronted by the reality of spending weeks at home, Argentine consumers rushed to the supermarkets to stock up on grocery items. The phenomenon of ‘panic buying’ has been present in Argentina, but not nearly to the extent seen in either the United States or the United Kingdom. Practically speaking, this difference is likely because many Argentines have much tighter household budgets and lack the financial flexibility to stock up on items of less immediate importance.

Supermarket managers in Argentina report that in the days leading up to the implementation of the quarantine, demand rose by roughly 50%, similar to the bump typically seen around the holidays. Going forward, nearly all retailers expected sales to dramatically slow as people hunker down in their homes.

In order to curb the potential for predatory pricing practices, the government legislated that prices of 2,000 basic products would be fixed at the level which existed on March 6, 2020. It has also urged food manufacturers to increase their production as much as possible. The food industry and its respective unions are largely cooperating. For example, Mastellone Hermanos, a major dairy processor, has pledged to increase production of dairy products while maintaining prices at November 2019 levels.

Even as food manufacturers cooperate, there are still challenges they need to overcome. Companies are updating their health and safety protocols and preparing for contingencies, such as what they will do if an employee tests positive for the virus. Wherever possible, manufacturers are creating more shifts of fewer people and implementing complete isolation between different shifts to reduce the possibility of contagion. Food companies are also scrambling to find employees to support the sales, manufacturing, logistics, and sanitation functions associated with increased production.

Rollin’ Down the River

Argentina’s agricultural bounty is not only of importance within the country. Argentina is a major exporter of agricultural goods such as grains, meats, dairy products, fruits, vegetables, and more. For years, the government has imposed severe agricultural export taxes in order to fund government programs. In fact, on March 4, 2020, the day after the country confirmed its first case of coronavirus, the Argentine government increased the export tax levied on soybeans to an appalling 33%.

Given its dependence on the tax revenues, Argentina’s government has a vested interest in ensuring the continuity of agricultural, and especially grain, exports. For this reason, port activities were included as one of the exemptions from the national quarantine. However, drama and dissention at the ports has created perhaps the biggest hiccup for Argentina’s agricultural sector.

The same day that the national quarantine was announced, the regional government of Timbúes, located in the province of Santa Fe, declared that port activities would be suspended. According to an analysis performed by Argentine newspaper La Nación, 20% of Argentina’s grain and byproducts passed through the port of Timbúes in 2019. The regional action outraged private exporters, federal government officials, and agricultural associations, but to date they have not managed to reverse the decision.

Port headaches have not been limited to Timbúes. On March 20, 2020, the union responsible for grain export quality control, URGARA, announced that it would be going on strike due to concerns about worker safety. Under collective bargaining law, the government has managed to suspend the strike through a 15-day reconciliation period. Once that period is expired, however, it is entirely possible that the union may choose to call for a strike.

More recently, on March 27, 2020, two unions that perform activities related to receiving ships in Argentina’s ports announced that they would not process any arriving ship that had not complied with a 14-day quarantine, beginning from the last port of departure. Rogue acts like these pose a serious risk to the normal flow of the food and agricultural chain in Argentina and the world at large.

Conclusion

According to the John Hopkins Coronavirus Resource Center, as of March 30, 2020, Argentina has 820 confirmed cases of the virus, including 228 recoveries and 23 deaths. Without doubt, the swift and proactive actions of the government have slowed the spread of the virus, although the economic toll will be felt in the coming weeks, months, and even years. For now, Argentina’s food and agricultural sector is striving to continue to function as fully as possible in these times of extreme crisis.