WASHINGTON, D.C., U.S. — The combination of policy changes and a new economic climate has spurred greater optimism in the Argentine agricultural sector, despite lingering challenges, the U.S. Department’s (USDA) Foreign Agricultural Service said in a April 4 report. Soon after taking office on Dec. 10, 2015, President Macri’s administration reversed the past government’s main policies toward the agricultural sector.

The policy changes included the reduction of the export tax on soybeans and its byproducts by 5 percentage points and eliminating export taxes on all other agricultural commodities, in addition to the elimination of export permits (ROEs) for grains and oilseeds. Along with these policy changes came the removal of foreign exchange restrictions and devaluation of the Argentine peso by about 45% on Dec. 17, 2015 (over 50% to date). This boosted the competiveness of agricultural exporters and was a positive signal to producers who waited for such an adjustment to begin liquidating their inventories. These changes mark a clear departure from the past government’s relationship with the agriculture sector and signals to producers that the Macri’s administration seeks to support their endeavors. The government acknowledges how key the sector is as it represents over 50% of exports and is the main provider of government revenues.

These changes gave much-needed economic relief to the majority of producers, turning negative margins into positive ones in time for harvest, the report said. As such, producers now have clear policies and predictability that will allow them plan for the future. Financing options are expected to increase for the next season as official banks such as the Bank of the Nation and Bank of the Province of Buenos Aires along with private banks are expected to provide various forms of credit to producers with attractive conditions and loan tenors.

Although commodity prices are not near the high levels that led to significant farmer returns over the past decade, the relief provided by the policy reforms along with farmers’ expectations of a moderate increase in commodity prices will drive plantings for the 2016-17 season. As a result, the 2016-17 season is expected to bring greater wheat, corn, and sunflower planting at the expense of soybeans, the dominant crop in Argentina. Projected improved returns along with better agronomic practices (i.e. crop rotation patterns) after years of monoculture soy plantings will fuel the beginning of a shift toward grains.

Wheat production for 2016-17 is projected to rebound to 14 million tonnes, while barley planted area is expected to drop somewhat with a total production of 3.2 million tonnes. Corn returns are expected to be very good (and significantly better than soybeans), encouraging farmers to plant 1 million hectares more with a projected production of 31.5 million tonnes. Sorghum and rice production are forecast to remain practically unchanged.