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Land, tractors and financing:

Changing contractual patterns in Argentine agriculture

Marcos Gallacher

Professor of Economics

University of CEMA

In the 1970 – 2008 period Argentine grain production increases sevenfold. Output increases were accompanied by significant changes in both the quantities and types of inputs used. The speed of adoption of new crop varieties was similar or greater than that observed for the U.S. (Trigo and Villareal, 2010). Fertilizer use in extensive crops – practically non-existent in the late 1970´s – increased to more than 3 million tons in 2008.

Organizational changes also occurred. Since the early 1960´s, a definite increase in farm size is observed. Production and management information is supplied to farmers by numerous mechanisms: private consultants, input (seed, ag chemical) firms as well as private “cooperative” organizations (Gallacher, 1988). Farms in Argentina compete intensely for land resources in order to increase scale of operation. This competition suggests that managerial arrangements best suited for efficiency may vary according to farming system (Gallacher, Goetz and Debertin, 1994, Gallacher, 1994).

New inputs, new ways of using inputs, as well as changing patterns of production organization resulted in a TFP increase of 2.4 a year for the 1968 – 2008 period. Since 1990, TFP increases appear to have been even larger (4.4 percent a year, Lema, 2010).

The proposed paper to be written for the IAAE book Contract Farming for Development focuses in the changing nature of contracts between landowners, suppliers of financial capital and suppliers of ag machinery services. In Argentina, an increasing separation of these three functions is observed: according to some sources, more than 50 percent of land in extensive grain production is not farmed by landowners themselves but by investors who do not own land or ag machinery equipment. “Virtual” firms managed by pure entrepreneurs, who design and manage contracts with suppliers of factors of production undertake a significant part of production activities.

The paper will summarize what has happened in relation of the organization of production during the last decades and will discuss the comparative advantage (or disadvantage) of current contractual schemes for ag-development and efficiency. The paper will also attempt to generalize the Argentine experience to a wider context.

References:

Gallacher, M. (1988):A note on private farm management consulting services:the case of Argentina.Agricultural EconomicsThe Journal of the International Association of Agricultural Economists (2):335343.

Gallacher, G.M., S.Goetz y D.L.Debertin (1994), "Managerial form, ownership and efficiency": a case study of Argentine Agriculture. Agricultural Economics-The Journal of the International Association of Agricultural Economists (11): 289-299.

Lema, D.(2010), Factores de crecimiento y productividad agrícola: el rol del cambio tecnológico. In: Reca, L., D.Lema and C.Flood (2010), El crecimiento de la agricultura argentina. Medio siglo de logros y desafíos. Editorial Facultad de Agronomia (UBA).

Trigo, E. and F.Villareal (2010), La innovación biotecnológica en la producción agrícola. In: Reca, L., D.Lema and C.Flood (2010), El crecimiento de la agricultura argentina. Medio siglo de logros y desafíos. Editorial Facultad de Agronomia (UBA).