**5.2 Storage**

380 Soybean Physiology and Biochemistry

Ninety five percent of the soybean harvest goes from farmers to country grain elevators (private or local cooperatives). The main final destiny is the crushing industry (oil and meal). The second destiny in importance are the exporters. The remaining activities have a small participation in the grain final destiny. Among these activities the animal feed producers and the grain purchase for own consumption (cattle producers) can be found. The commercialization stages are divided according to the offerers, been primary operations when the seller of the goods is the producer; secondary operations when the goods are sold by any of the intermediary agents to exporters or to the industry, and finally, terciary

In the primary stage, the "producers" are the ones who make up the supply : they can be land owners, tenants, contractors, pool producers, agricultural investments common funds, and the demand are usually country grian elevators, first grade cooperatives, livestock producers (poultry, pork, feed lot), exchange dealers31, industries and expoterers with

The secondary stage is focused on country grain eleators, local cooperatives, inputs providers and exchange dealers as well as exporters, industrials and livestock producers. Brokers and institutions like the Stock Exchange, Cereal Boards and Arbitration Chambers can also take part in any of these stages. They –boards and chambers- are Arbitration Courts in case there is any kind of controversy. They set reference prices and have grain analysis laboratories. In Argentina, there are four Cereal Boards: Buenos Aires, Córdoba, Bahía

As regards the transaction steps, the most representative ones can be divided between those made with merchandise readily available or not. The most common payment ways when the goods delivery is effectively done can be: cash on delivery, cash with insured delivery quota, cash with uncertain delivery, cash on deposit certificates or a price to be fixed. When the goods are to be delivered in the future, the payment ways can be: advance payment,

In Argentina, there are also two exchange markets where Futures and Options contracts on soybean can be made: "Rosario Futures Exchange (Rofex)" and "*Mercado Término de Buenos Aires (MATBA)*" where soybean oil contracts can be found. Although the use of these instruments is growing; it is not widely spread yet, specially among the small producers. Besides, successive economic crisis and interventions in the agricultural markets have slowed down its development. It is important to point out that this alternative is use to secure prices rather than to deliver the goods. The use of these markets is around the 28% of

The operators that take part in grain commerce have been classified according to their function into 17 categories by the National Office of Agroindustrial Commerce and Control (ONCCA, 2006). The ones involved in soybean markets are: country grain eleators (2685), grain conditioners (62), industrials (58), industrial-selector (35), laboratory (25), public scales (21), Futures Market (3), consigner without facilities (2), broker (359), importer (27),

31 Exchange dealers receive soybean as a form of payment for goods in general and for leasing.

exchange (with other goods), and forward payments (with a contract).

the total average production in the last five years (2005-2009).

exporter (356), exchange agent (665) and delivery agent (11).

**5. Domestic commercialization, storage and logistics and transportation** 

**services** 

**5.1 Comercialization. Main characteristics** 

vertical integration strategies.

Blanca and Entre Ríos.

operations which are those where exportation is involved.

The expansion of the storage capacity in Argentina was historically related to the volume and composition of the country grain production and also to the politicies officially developed in relation to the way of trading. In the last years, an expansion of the storage capacity is observed. This expansion had its origin, among other factors, in the sustained increase of grain production, which implied a growing need of places to keep this production. (Lopez, 2008)


Table 7. Argentine Storage Capacity

Producers kept the grain in the farm (when possible) or storage them in local cooperatives and country grain elevators or in the silos found in ports or factories (Table 7). National storage capacity in 2007 was nearly of 71 million tons. It must be mentioned that there's no official information in this area so the growth rate considered was similar to the one observed in former periods. (Lopez, 2008)32

#### **5.2.1 The silo bag as a storage alternative**

Between 1999/2000 silo bag33 storage technique was introduced (Picture 1). It is a complementary capacity not only at a producer level but also in the case of some country grain elevators (FAO-SAGPYA, 2004). This technique consists of storaging the grains in hermetic plastic bags where the breathing process of the grain biotic components (grains, fungus, insects, etc.) consume the oxygen generating in turn carbone dioxide. This new

<sup>32</sup> It is important to remember information about the storage capacity in Argentina is scarce and in some cases of uncertain reliability (Lopez, 2008).

<sup>33</sup> The relationship installed capacity/silo bag was 2,66/1, 30% of total storage capacity. See Table 7.

atmosphere rich in carbone dioxide and poor in oxygen suppress, inactivate or reduce the reproduction capacity and/or fungus and insects development and also the proper grain activity which in turn makes it easier to store them (Casini, 2002).

Picture 1. Silo Bag

The spread of the use of this technology introduced new possibilities (it increased the retainining grain autonomy at a low cost) -although with certain limitations34- and also generated an additional service circuit formed by the bagging and unbagging offerers, as weel as the production of stuffing machinery (Bisang and Sztulwark, 2007). The increase observed in the use of silo bags, is an expression of a bigger storage capacity needed.

The use of this way of storing among the producers and country grain elevators allows them35 to keep grain and make deliveries, avoiding high freight costs during the harvest time. If Soybean is stored in a dry and clean way, it can be kept between 4 and 12 months in good conditions. This allows to improve income up to 15.5 % (average, if sold in the month of January)(Ghida Daza , 2002).

#### **5.3 Logistics and transportation services**

Argentina has lower costs as regards production for most of the agricultural products where it has an important share of the global market, but it has higher costs as regards the commercialization than its most important competitors: Brazil and the United States (Dohlman *et al*., 2001; Tavarez 2004; Nardi and Davis, 2006). The higher commercialization costs are due to, in the case of soybean, higher transport, storage and exportation tariff (Nardi and Davis, 2006). Eighty four percent of the grain production is taken to the

<sup>34</sup> Possibility of bag breaking and subsequent loss of stored grain quality.

<sup>35</sup> Other advantages would be: to activate the harvest when the production is stored in the same productive land and to obtain credits on the stored grain (Warrant)

atmosphere rich in carbone dioxide and poor in oxygen suppress, inactivate or reduce the reproduction capacity and/or fungus and insects development and also the proper grain

The spread of the use of this technology introduced new possibilities (it increased the retainining grain autonomy at a low cost) -although with certain limitations34- and also generated an additional service circuit formed by the bagging and unbagging offerers, as weel as the production of stuffing machinery (Bisang and Sztulwark, 2007). The increase

The use of this way of storing among the producers and country grain elevators allows them35 to keep grain and make deliveries, avoiding high freight costs during the harvest time. If Soybean is stored in a dry and clean way, it can be kept between 4 and 12 months in good conditions. This allows to improve income up to 15.5 % (average, if sold in the month

Argentina has lower costs as regards production for most of the agricultural products where it has an important share of the global market, but it has higher costs as regards the commercialization than its most important competitors: Brazil and the United States (Dohlman *et al*., 2001; Tavarez 2004; Nardi and Davis, 2006). The higher commercialization costs are due to, in the case of soybean, higher transport, storage and exportation tariff (Nardi and Davis, 2006). Eighty four percent of the grain production is taken to the

35 Other advantages would be: to activate the harvest when the production is stored in the same

observed in the use of silo bags, is an expression of a bigger storage capacity needed.

activity which in turn makes it easier to store them (Casini, 2002).

Picture 1. Silo Bag

of January)(Ghida Daza , 2002).

**5.3 Logistics and transportation services** 

34 Possibility of bag breaking and subsequent loss of stored grain quality.

productive land and to obtain credits on the stored grain (Warrant)

exporting ports by truck36, 14,5% by rail and 1,5% by barges. Grain exports are made approximately 90% by ship, 7% by truck and the rest by rail and barge.

According to data from the Stock Exchange of Rosario, the Gran Rosario area (province of Sta Fe) is the one with the highest growth as regards land cargo transportation in Argentina in the last decade with annual volumes of around 60 million tons of grain products; 8 million tons of these annual volumes come by rail37 and 52 millons by truck. This implies that during the year an average of 5.000 trucks per day are concentrated. This number increases during the harvest months. (Giancola *et al*., 2010).

Although there is a tariff difference between the truck and the rest of the means of transport (truck versus barge 3.25 to 1, truck versus rail38 2.5 to 1 (Commercial Infrastructure Area) (SAGPYA, 2007), the strong participation of the truck for domestic freight is due to its speed and flexibility to adapt to the resources and conditioning structures. The storage centers are generally located in the productive areas or within a radius of 20 km and at an average distance of 300 km to the industrial centers and port terminals39. The national road infrastructure has a total extension of approximately 38.000km.

Motor carrier: The trucking fleet is approximately 400.000 units. For cereal and oilseeds transport there maybe 5,000 special units, but there are around 60,000 general cargo units adaptable to this need. The average cargo capacity of a truck is 28 tons. The average age of these trucks is around 25 years, in an atomized system of car properties.

Railway transport: One of the limitations to its development as a mean of transportation is that more than 1,700 establishments which work as storage centers (83% of the total) does not have rail access (ONCCA, 2006). The present rail granted companies which are now giving cargo services are: ALL Central, ALL Mesopotamico, Ferro Expreso Pampeano, Belgrano Cargas and Nuevo Central Argentino (NCA). (Giancola *et al*., 2010). Each company attends a different region, and all reach the Ports of Rosario. Regarding the operating capacity for the grain transport and its derived products of all the net rails, there are nowadays nearly 6.500 wagons (40 tons in each grain wagon depending on the gauge) between solid and liquid cargo and a totalnet of approximately 28,000 km (SAGPYA, 2007).

Fluvial/Maritime transport: There are 40 Argentine port terminals which have the capacity to deliver grain, oil and protein meal in bulk. Eight of these are maritime and they are located in the province of Buenos Aires. The maritime terminals deliver 19%of the cargo of this kind of products. The other 24 shipment terminals are fluvial, and from them 81% of the grain, vegetable oil and protein meal is delivered.

Most of the soybean complex products are exported from the Paraná River, in the north and south of the city of Rosario, from San Martin Port to Arroyo Seco; this section covers 70 km.

<sup>36</sup> Compared to Brazil and the United States, Argentina is one of the exporting countries which makes the biggest use of the truck due to the average distance between the primary productive centers and the industrial processing .

<sup>37</sup> With the use of the motor carrier, the rail transportation use was reduced since the former is more versatile and it does not have a fixed minimum volume or a fixed route.

<sup>38</sup> These differences are kept although the rail tariff has increased due to the raise in the petroleum cost since 2002.

<sup>39</sup> With the shift of the agricultural frontier to the North East and North West of Argentina where distances to the port of Rosario are more than 350-400 km the transport cost incidence due to the rail use would decrease making those regions more competitive .

These river port terminals deliver 76% of the cereal, oilseeds protein meal and vegetable oil exports and the rest of the river port terminals deliver 4% of global cargo.

The grain solid by products storage volume in the Paraná Hydroway ports grew from 1.5 million tons to almost 8 million. The cargo boats rhythm, in turn, grew from 23 million tons per hour to 54 million tons between 1990 and 2007. This operative capacity growth also allowed a growth of the Up-River exports from 13.5 million tons to 54 million tons as regards grains and pellets, at no extra costs of storage or delays of the cargo boats stays (SAGPYA, 2007).
