Be wary, be watchful, but not afraid.
November 14, 2007 By Top Crop Manager
There is little doubt that increasing globalization has translated into greater
opportunities, and with it has come greater competition. In November 2005, a
group from Ontario made up of growers, farm organizations and company representatives
and extension personnel, journeyed to Argentina to experience the country's
wheat industry, first hand.
By comparison, Ontario's industry has changed considerably since the late 1990s:
no longer a weak rotational crop, wheat is now a strong contributor to the province's
agri-food economy, including 650,000 to one million acres annually. With each
bountiful harvest there is renewed interest in expanding markets beyond the
However, Ontario interests are not alone in this broadening view of the world.
Argentina is poised to gain a toe-hold on foreign markets, especially given
the size of its crop, a growing awareness for quality issues and an abundant
supply of cheap labour to carry it.
Crosby Devitt, manager of research and innovation with the Ontario Wheat Producers'
Marketing Board in Guelph, was part of the Ontario group. He returned with a
better understanding of the Argentinean wheat industry and a healthy respect
for its potential. While he agrees the Ontario industry is competing for many
of the same markets, there are still significant differences that must be recognized.
Awareness is the key, not fear.
On the numbers side, Argentina grows about 15 million acres of wheat, more
than 10 times the acreage in Ontario. Yet, at roughly one tonne per acre or
36bu/ac, their yield average across the country is less than half of Ontario's.
That may be a result of double cropping practices closer to the equator which
drain yield averages. Much of their wheat is bread wheat quality and is more
of a North American spring type which they plant during their fall season, in
May and June.
"They actually don't have all the different classes we have in Ontario,
but within that class base, they have varieties that fit into high quality,
medium and low quality," explains Devitt. He adds that a large amount of
Argentine wheat is exported to Brazil for feed. "So, they're trying to
push that high quality class to be able to compete on the world market."
A concern for Ontario, though?
Whether that should concern Ontario's wheat industry is another issue. In Argentina
there are three seed companies which account for about 75 percent of wheat seed
sold in the country. Buck Seeds has 41 percent market share, Klein has 34 and
Nidera has nine percent. But certified seed is an issue in Argentina, as well,
with up to 50 percent farmer saved and 27 percent brown bag.
But their breeding plots are also large and impressive, according to Devitt.
"They would have 100 acres of small plots, in all stages of development,
allowing testing of many lines with intense selection pressure, and they have
the ability to scale-up very fast," he says. The downside on all of this?
Their labour costs are considerably lower than in North America. "They
can do it by hiring labourers for $8.00 or $20.00 per day. They can afford to
do a lot more small plot stuff at lower costs, and I don't know if that's what
we want, but that is what's happening there."
That may be the biggest challenge facing the Argentinean wheat industry as
it tries to improve its quality and standing on the world market. Together with
Brazil, the two countries have been able to reposition themselves globally,
first establishing a volume-based supply, followed by improving quality.
Competition for Ontario
While the notion of a large volume, quality-driven supplier with 15 million
tonnes of wheat expanding its export base is alarming, there is still the need
to focus on what Ontario growers do best. Instead of worrying about Argentina,
stay on top of current competitors in the US, advises Peter Johnson, who was
on the same tour with Devitt.
Johnson believes the Ontario industry should concentrate on improving quality
and filling specific demands while keeping an eye on Argentina. "We need
to know more of what's going on in Kansas, and Ohio, and New York and in Michigan,"
says Johnson, the cereal crop specialist with the Ontario Ministry of Agriculture,
Food and Rural Affairs. "That's because in Argentina, yes, they export
wheat, but they export to different markets than what we've been exporting to."
Since the wheat varieties that are grown in Ontario largely originate in the
US, Johnson reasons the industry can focus on meeting the demands in US markets
while adjusting to consistently higher volumes, year to year. "When you
go back five or seven years, we've consistently had 650,000 to a million acres,"
he says, noting that prior to that, there were years where just 350,000 acres
were grown. "There's a range of reasons for increasing acres, not the least
of which was that with the single-desk selling policy, a lot of farmers didn't
know if they were making money with wheat."
But Ontario growers know better now, with higher levels of self marketing and
a production level that requires the Ontario industry to seek out new export
markets. That plays to opportunities on two fronts: one is at a level with the
US, something Johnson welcomes, and two is with the Argentineans, which presents
some concerns. "If you look at the average yield numbers, we're so far
ahead of any other Great Lakes state in wheat yield that I can't imagine we
shouldn't be the area growing wheat," he says. "If that's true and
we're going to continue growing that million acres, then we have to watch how
quickly Argentina steps up their quality, and we have to start focussing on
markets further abroad."
The wild card working against Argentina in the near future will be its labour
costs. As its wheat industry raises its quality, so too will the price of playing
on that global stage. -30-