Wartime Sunflower Boom Beckons for Farmers on Argentina’s Pampas Plains

(Bloomberg) -- Ever since Russia invaded Ukraine, farmers in one small town after another on Argentina's Pampas plains have been recalibrating plans to account for rocketing prices of both crops and inputs like fertilizers. Six weeks later, a trend is emerging: the South American nation is poised for a sunflower boom.

Russia and Ukraine normally account for nearly 80% of sun oil exports. With shipments plunging amid the upheaval of war, a door has swung open for Argentina, the biggest soy oil supplier, to rekindle its sunflower industry.

Planting in 2022-2023 could spread as wide as 2 million hectares (4.9 million acres), Guillermo Pozzi Jauregui, head of the Argentine Sunflower Association, said in an interview. That'd be a fifth more than the previous season and the most for 14 years, according to Buenos Aires Grain Exchange data. 

The switch is a no-brainer for Argentine farmers: Prices for oil made from sun seeds are at an all-time high; export taxes of 7% are far lower than rival crops; and sunflowers require relatively little fertilizer, which has become scarce and very expensive.

Some growers, though, won't be able to seize the opportunity because suppliers like ChemChina's Syngenta and Corteva Inc. can't breed seeds in Argentina fast enough to meet a huge jump in demand. Importing is hardly an option because plant genetics will be wrong for Argentine conditions.

“There's no other country that can absorb the global sunflower production crunch like Argentina,” Pozzi Jauregui said. “Farmers will plant as much as they can, but they'll be limited by the availability of seeds.”

Planting season on the Pampas isn't until October, though northern regions that account for a quarter of acreage start sowing in July.

A more pressing issue for farmers is what to do in the upcoming winter, when wheat and barley are grown. Argentina is normally the seventh-biggest wheat exporter, with Russia and Ukraine near the top of a U.S. Department of Agriculture ranking that combines all European Union shipments.

Unlike sunflowers, wheat, which gets planted from the end of May, needs plenty of pricey crop nutrients. And with other costs also soaring, including diesel and field rent often linked to soybean prices, it may be a zero-sum game for profits.

Wheat is also at risk from heavy meddling in exports by an interventionist government trying to shield Argentines, whose staples include bread and pasta, from food inflation.

“Despite the combination of higher costs and Argentine risk, the numbers aren't working out badly and we could have a season that's similar to the last one,” when Argentina produced a record 21.8 million metric tons, said Miguel Cane, head of wheat association Argentrigo. 

“But with the government intervening, farmers go from offensive attitudes to defensive ones: spend the least possible now and wait it out for better times.”

That could lead acreage to shrink if farmers in the breadbasket of southern Buenos Aires province prefer barely over wheat this southern hemisphere winter, or skip straight to sunflowers in the spring, with soy losing out.

“Profits from wheat will get worse,” Miguel Fortuna, who sells seeds in Intendente Alvear, a town in neighboring La Pampa province, said at a trade fair last month. “And there's a lot of interest gathering around sunflowers.” 

Sun seeds are likely to wrestle acreage away from wheat in northern areas, where the plants grow at the same time, according to Esteban Copati, head of crop estimates at the Buenos Aires Grain Exchange.

Even as farmers and traders navigate volatility in commodity markets and political risks, they need to pay close attention to the threat of a third consecutive La Nina weather pattern that would bring a new bout of dryness to Argentina, Copati said

“There's a lot of uncertainty with crop prices, input costs and local politics, but all of that plays second fiddle to the weather,” he said. “Rains are restoring wetness to soil profiles, which is positive, but we're staring down a third La Nina that could limit surface moisture needed for seeds to germinate.”

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