Argentina is the principal supplier of soy oil to India. Soya is Argentina’s main crop, accounting for 50% of its agricultural land. The country has world class facilities for soya processing, logistics and exports. Given its dependence on soya production and exports, Argentina has even been called a “soybean republic.” [1]
Argentina’s annual exports of soya oil to India range between $1 billion to $2 billion; it also supplies sunflower oil and pulses in small quantities. [2] India is likely to increase the imports of these three items as well as other agro-products from Argentina in the future.
Argentina is globally the largest exporter of soy meal [3] and was until 2011 the largest exporter of sunflower oil in the world (now it is Ukraine). [4] It has the potential to increase production and exports of both sunflower and soya.
India’s total imports of edible oil from all sources increased from 1 million tonnes (mt) in 1992 to 4.7 mt in 2001-02 and to 9.6 mt in 2011-12. At this rate, India’s imports could cross 20 mt by 2030. India is the largest importer of edible oils in the world, accounting for 14.7% of global imports in edible oils. [5]
India’s consumption of edible oil has been steadily increasing: from 6 mt in 1992 to 10 mt in 2002-03 and 17 mt in 2011-12. Consumption will inevitably continue to increase due to the growing population and economy, as well as a growing middle class. The per capita consumption of edible oil is expected to increase from 14.3 kilos to as much as 20 kilos by 2020.
India’s domestic production of edible oil cannot cope with the growth in consumption: the production was 5 mt in 1992, 6.7 mt in 2001-02, and 8.1 mt in 2011-12. India has no choice but to import in order to meet the shortfall between domestic production and consumption.
Although India is the world’s largest producer and consumer of pulses, the domestic production of pulses has been stagnant for decades and unable to match the high rate of growth of demand. Consequently, India is the largest importer of pulses in the world, accounting for around half of the global trade in pulses. [6] In 2012, India imported 3.8 mt of pulses, and this number is expected to increase in the coming decades. [7] The bulk of the imports are from Canada, Australia and Myanmar. Argentina has started exporting small quantities in recent years and is keen to become a major supplier to India.
India’s prospects for significantly increasing the production of oil seeds and pulses by increasing the area of cultivation are not promising, because of constraints on agricultural land; agricultural area is decreasing due rapid urbanisation. Indian agriculture, subject to a variable monsoon, also faces a recurrent water crisis, and the water table is declining in several states where groundwater is pumped indiscriminately for irrigation. Indian farmers with small land-holdings are unable to invest in technological innovation that will decrease their dependence on rainfall.
India has become self-sufficient in the production of cereals. However, programmes to increase the production of oil seeds and pulses have not been too successful because of government restrictions on the oilseed processing industry, and a lack of integration between the various sections of the industry.
The yields of oil seeds and pulses therefore remain low. For example, while Argentina produces around 3 tonnes of soy per hectare, the yield of soy in India is just 1 tonne per hectare. [8]
India is expected to continue to increase its imports of edible oil and pulses in the future. Argentina can be a regular long-term supplier. Argentina has the potential to increase the land under agriculture and it has abundant water reserves. It is a global leader in research and best practices in agribusiness. With these advantages, Argentina can increase production and exports globally, including to India.
Indian companies can buy stakes in Argentine agribusinesses or form joint ventures and establish direct access to production in Argentina and cut the transaction cost of traders. Argentine companies have expressed an interest in partnering with Indian companies.
Ambassador Viswanathan is Distinguished Fellow, Latin America Studies, Gateway House. He is the former Indian Ambassador to Argentina, Uruguay, Paraguay and Venezuela, and Consul General in Sao Paulo.
This article is based on Ambassador Viswanathan’s comments at a conference on ‘Argentina and Asia by 2030: strategies in agribusiness for the developing world’ at the University of Buenos Aires in April 2014. A video of the talk is available here. You can read more exclusive content here.
For interview requests with the author, or for permission to republish, please contact outreach@gatewayhouse.in.
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References
[1] Turzi, M. ‘The SoybeanRepublic’. Yale Journal of International Affairs, 59-68.
[2] Goldfarb, L., & Zoomers, A. (2013). The Drivers Behind the Rapid Expansion of Genetically Modified Soya Production into the Chaco Region of Argentina. Biofuels –Economy, Environment and Sustainability. Retrieved from http://cdn.intechopen.com/pdfs-wm/42199.pdf; and Embassy of India, Buenos Aries. (2013, March 1). India-Argentina Bilateral Relations. Retrieved from http://www.indembarg.org.ar/images/Bilateral%
20Brief%20India%20Argentina%20Mar%202013.pdf
[3] Johnson, C. (2014, Jan 4). ‘Argentine farmer grows soybeans and more soybeans on 37,000 acres’. Corn and Soybean Digest. Retrieved from http://cornandsoybeandigest.com/soybeans/argentine-farmer-grows-soybeans-and-more-soybeans-37000-acres
[4] Romig, S. (2011, July 13). ‘Argentina sunflower seed chamber sees area up 10%’. MarketWatch. Retrieved from http://www.marketwatch.com/story/argentina-sunflower-seed-chamber-sees-area-up-10-2011-07-13
[5] Mehta, B. (2014, January 23). Indian Government Policy Changes & its impact on vegetable oils. Retrieved from http://www.seaofindia.com/images/67/Palm%20Oil%20Outlook%20Conference_
23rd%20Jan%202014%20(-2)%20at%20KL.pdf; and Mehta, B. (2013, March 15). Overview of Indian Oilseed Sector. Retrieved from http://www.agrioutlookindia.ncaer.org/events/india-edible-oil-sector-mar.pdf
[6] Gowda, C. L., Srinivasan, S., Gaur, P. M., & Saxena, K. B. (2013). Enhancing the Productivity and Production of Pulses in India. Climate Change and Sustainable Food Security. Bangalore: National Institute of Advanced Studies. Retrieved from http://oar.icrisat.org/7101/1/EnhancingTheProductivity-2013.pdf)
[7] Ministry of Agriculture. (2013, July 1). Price policy for Rabi crops. (2013, July 1). Retrieved from http://cacp.dacnet.nic.in/ViewReports.aspx?Input=2&PageId=40&KeyId=477
[8] Masuda, T., & Goldsmith, P. D. (2009). World Soybean Production: Area Harvested, Yield, and Long-Term Projections. International Food and Agribusiness Management Review, 12, 143-162. Retrieved from http://ageconsearch.umn.edu/bitstream/92573/2/20091023_Formatted.pdf