Soybean Production in Argentina: The Duhau Group
Crop-planning was affected by macroeconomic factors including international disputes, commodity prices, local tax and agricultural policies, etc. Enrique and Alejandro Duhau, co-owners of the Duhau Group, analyzed these factors, as well as technical and financial aspects, as they planned their 2019/2020 production. The Duhau Group was an agribusiness holding with $112 in revenues for 2018. That year, the Group harvested 112,000 hectares, produced 46,000 liters of milk a day, and 64,000 cattle were fattened at its feedlots. The ongoing U.S.-China trade war had lifted South American soybean prices to 20% higher than the CBOT price. Domestically, a severe drought had undermined Argentina's 2018 soybean production, leaving Argentine soy crushing plants extremely undersupplied. Pressed by the country's economic emergency, Argentina s President Macri had imposed new tariffs on farming exports. With these and other factors in mind, Enrique and Alejandro Duhau had to decide what to plant the following year and whether to lease additional land for agriculture. Should they prioritize the market opportunity for soybeans over technical factors such as crop rotation? What risks would increasing the amount of leased land entail? Would it prove convenient to pay a higher-than-usual price to secure more leases? Was their hedging strategy appropriate or should it be revised based on the current context?