(Photo: Hughes in his office in the downtown of Buenos Aires city)
Buenos Aires, August 15th. David Hughes is one of the most popular farmers in the country. His farm is placed in Alberti, a little town in the heart of the Buenos Aires province, alongside the Salado river. A third of its farm is usually flooded and by thus it is dedicated to the cow-calf operation. The remaining two theirs are dedicated to cash crops (corn, wheat, and soybean) and pastures.
David also heads the Wheat Chain Association (Argentrigo), but in this interview with eFarmNewsAr he spoke as a simple farmer. We consider so interesting to talk with him after the triumph of the opposition party in the primaries opened a turbulent moment in the economy.
eFarmN: Hi David, and thanks for accepting this invitation to talk. We would like to know how are you living this particular moment of the Argentine economy as a farmer.
David Hughes. With a high dose of uncertainty, of course. Not only we don’t know what will happen with the economy, but also what a possible new government will do related with two crucial issues related with the farming: the export taxes rate and possible foreign trade restrictions.
eFarmN: Why do you say this?
D.H.: Because they (the Peronism party) already were government and they imposed high export taxes rates and limited the foreign trade, applying quotas or a complex system of licenses. It wasn’t tools that favored the farming activity in the country; in fact, we achieved the minor wheat area in a century. We wouldn’t like to return to this. Therefore we are waiting for clear signals to decide how to invest the money.
eFarmN: Which is the margin that you have to re-direct investment when corn sow season is closer to start?
D.H. Well, you know that corn season is just beginning in the north of the country. We can decide if we will plant more hectares of corn or if we will switch them to soybean. And the reason is very easy: to plant a corn hectare costs 450/500 dollars, while to plant a soybean just 300/350. Furthermore, we can buy a cheaper corn seed, that although achieve lower yields, it demands fewer fertilizers. The adjustment is doing applying fewer technologies to crops. Those are ways to save money in an uncertainty context.
eFarmN: How the Peso depreciation impacts in your business, David?
D.H.: Consider that 60% of our costs are fixed in dollars. I’m talking about seed, fertilizers, and chemicals. The other 40% is nominated in local currency (Peso) and related to fuels, labor, commercial costs, etc. That is to say that the better grains prices in Pesos only affect this 40%, and only for a moment because devaluation then passes through to inflation. But the main problem is the lack of reference in the market. We wonder when the economy will stabilize.
eFarmN: Another issue is the high-interest rates. The government uses it to control the passage from dollars to pesos. How they affect you?
D.H.: Forget to take a loan in pesos! The only chance is to take it in dollars, but paying an interest rate between 5 to 7 percent. But there is a risk associated with the currency rate. You can’t know how much the collar will cost in the next week, next month or when you collect your grain.
eFarmN: What are your concernings if the opposition takes office next December?
D.H.: As I said to you, the export taxes rate is a big deal. Perhaps opposition is thinking to rise them, but you know that we are producing so close to the costs line, and in a bearish market, rising the export taxes could be catastrophic.