Categoría: Agroindustrialización en Origen

Vertical integration of Argentine production systems

New paradigms for Argentine agricultural production systems? Add value at source.

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Ing. Agr. M.Sc. Mario Bragachini 
Coordinador de la Red del Proyecto Agricultura de Precisión y Máquinas Precisas 
Coordinador del Proyecto Específico Eficiencia de Cosecha 
INTA EEA Manfredi - E-mail: precop@correo.inta.gov.ar 
Junio de 2009
 

In recent years changes have been profound at global level and also in Argentina, those changes among other things, show a growth of rented agricultural land with short term contracts (often one year). This process makes it difficult to plan a crop rotation system, technology application such as nutrient and soil carbon balance, and it also affects the development of structures that allow integrations to facilitate industrialization in origin processes, vegetable protein to animal protein transformation, biofuels, etc.. Finally discourages partnership integration to undertake higher value added projects in origin, which leads to fair growth and development of the country rural areas.

Crisis sharpens ingenuity and activate many minds at all food chain levels.

Therefore the need arises to develop comprehensive strategies to guide the technological development of active policies to improve the reality facing the next 20 years. The proposal is based on the idea of stopping being spectators to become one of the many protagonists of the changes that we should at least consider, discuss, and then formulate concrete projects that will be transformed into products.

It is clear that the Argentina agrifood chain should grow in productivity, added value and sustainability, for that it is convenient to grow in primary in-origin industrialization processes, grow in the vegetal origin food to animal protein transformation ( beef, milk, pork, poultry), and should also grow in secondary industrialization (ie meat packing, dairy plants, pork products, etc.. etc.., all with traceable quality and designation of origin for certain products), and if is possible in tertiary industrialization (ready to be consumed cooked meats). And should also grow in the cold chain and traceable supply to the local and world market shelves, but always under source managed structures.

Today there are many successful examples of large agro-industrial complex, but it is also true that the bulk of Argentina agriculture export consists of commodities, so it is suggested that in the future no primary product should travel by truck more than 80 Km. without an increase in value or source value aggregate. Over the next 10 years, Argentina needs to increase the exported agrifood average value of 400 U$S /tn to over 1200 U$S /tn and that value or income increment should remain with the primary agricultural producers if they want to remain competitive. The first question is competitive with respect to whom?, competitive respect the rest of the world producers that has long since went beyond their gates; the second question is how do we do that?, and the answer is actively participating in the agrifood chain in a associative manner, that means the vertical integration of the primary producer in the agro food chain.

The degree of development of a country is reflected by the value of the exported ton against the value of the imported ton.

The development of a country's territory is measured in the same way; today in Argentina there are agrioindustrial provinces and cities, and other that only produce and "export" with expensive freight, only raw material, it is clear that it is difficult to grow when low value products (grain) travel by truck over 200 Km. to their first destination.

It is not desirable and sustainable to import tons of fertilizers, agrochemicals and agricultural machinery at 700, 3000 and 10000 U$S/Tn respectively, transform it into grain and oilseeds and export it at 400 U$S/ton on average.

Of course, looking 10 years ahead much has to change because of this, without dramatizing, or harming anyone, and for the good of the whole country; evolve with concrete proposals and actions in which the vast majority of people agree, and then become food and agriculture policies of state.

Thus, in INTA, since PRECOP Project II, a group of technicians from various experimental stations since mid-2007 are working to create and spread a new concept of farmland agro-industrialization where the value is added at source, where primary production is produced with the best technology with precision by environment, with the concept that quality starts from the beginning, where physical and quality losses are precluded within a framework of "quality assurance".

Where possible produce grain or oilseeds to cover the objective of meeting a specific quality standard, demanded by agribusiness, according to the products they manufacture and the demands of different markets.

Precision agriculture in addition to facilitate the accurate and cost-effective use of the inputs applied by environment, is also a powerful tool for tracing processes, reducing environmental and products pollution.

Subsequent to this Value Added Primary Process comes the next step, primary industrialization, or "manufacture" after some specific processes (milling, extruding) the best specific balanced feed (for pigs, chickens and cattle), this product with relative value added should not go many miles to be converted into animal protein: pork, chicken (egg/meat) and cattle (milk/meat). All intensive transformation processes generate effluents that must be correctly treated and changed through a biodegradation process (biodigester) into biogas, bioelectricity and biofertilizer, energy that must be reused in the agro-industrial complex with much efficiency and with the biofertilizer replenish nutrients in those fields where the grains and forage were extracted.

In the same complex secondary industries that give the large increment in added value should be located, chicken, pork and cattle meat packers, dairies, eggs processing industries, deli meats, cheeses, etc. producers, many of them with origin designation (which is more value added). All these industries use energy and discharge effluents that must also be transformed into biogas, bioelectricity and biofertilizers, improving the energy equation and the environmental management.

In the same complex the cold transport chain and the traceability must exist in order to reach the world shelves with the best possible quality.

The proposed changes in these production models examples are indicating an evolution in the value added management where many farmers work in partnership in strategic geographical locations. These producers supply their primary production to a competitive scale industrialization center which operates as a Incorporated Company with cooperative spirit, where each unit is managed independently generating income to be redistributed in proportion to the kilograms of raw material provided. The proposal should include an income appropriation by the primary producer in all processes, secondary industrialization, transport, cold chain and domestic and foreign markets (exports) sales.

This source value-added generates growth with development (generates source work), the fair distribution is ensured by the spirit of partnership enterprises, avoiding the concentration of population in large cities.

Sustainability and natural resources conservation would also be insured by the inputs management according to the environment, with field work traceability and crop rotation sequence where corn, sorghum and wheat will always be present as carbon capturing crops and soil structure generating roots. Soybeans will be the protein crop par excellence. At chemical level, much of the nutrients will be returned to the soil through the provision of biofertilizers from biodigestors rationally distributed where appropriate. So this work method will also prevent the now massive low-priced nutrients export, carried by the grain, flour and oil, to the rest of the world.

Many production models can be designed under this competitive scale vertical integration partnership and source value added philosophy.

We must also bear in mind that in Argentina is possible in part to replicate some of the 160 corn ethanol plants that currently exist in the U.S. and consume 90 M/tons of corn per year. Models of ethanol production from sugar cane, from corn and sorghum grain and from whole sweet sorghum plants harvested with sugarcane harvesters will be a reality in Argentina over the medium term. All these alcohol industrial complexes produce valuable waste for animal feed, mainly very high in protein (25%) with 10 to 12% humidity corn and grain sorghum DDG (distilled dry grain). It can also be worked as perishable DDGS, with 60% humidity (short distance rations), which favors the close to the plant producer's associations. Ethanol can not be transported by pipes, so it must be done by truck or train to an oil refinery, this indicates a thorough analysis of the situation.

Nor should we dismiss the other renewable energy sources such as wind power in areas with much wind, and solar energy, two sources of electricity that will be the key to produce hydrogen, an experimental hydrogen powered tractor already exists, and as we know hydrogen technology is electricity dependent.

In the way of environmental and energy balance biogas technology exists, these models generates much gas and in the event of biogas surplus it can be converted into electricity through a generator, biogas effluent is a biofertilizer rich in P and N, but very diluted, which means high flow per hectare, indicating the desirability of using pivot irrigation equipment for application, with also a biogas operated water pump. This alternative would be viable in areas of good quality and quantity of groundwater; where there is no water, biofertilizer distribution will be done with special tanks.

All of these production models already exists and operate in Brazil, USA, Central Europe and will also replicate in Argentina but with the great challenge of vertical integration. Oil values of U$S 66/barrel in the year 2009, versus 16 US$/barrel in 2002, current land value of 8000 U$S/ha. versus 2000 U$S/ha in 2002 indicate paradigms changes where land and energy use is not enough sustainable for a country exporting grain without added value from one area to another and less to other countries.

Another thing that will surely be a constant in future analysis will be how much added value can be made out of a millimeter of useful water in a soil profile. The average crop conversions indicate 7 kg/ha of soybeans per millimeter of useful water, 8 kg/ha of wheat, 14 kg/ha of grain sorghum and 17 kg/ha of corn, approximately. This indicates that if soybeans value is U$S 436/ton and wheat 229 U$S/ton, corn 167 U$S/ton and sorghum 130 U$S/ton, useful water produces primarily U$S 3,05/mm. of soybeans and wheat only U$S 1,83/mm., corn produces 2,83 U$S/mm. and grain sorghum 1,82 U$S/mm. and as it is known in no-till when double cropping, the millimeter used for wheat surely will not be available for second crop corn or soybeans. Therefore in the future we will speak about production cost, profitability, but also about water millimeters crop conversion capacity, of course, not forgetting system sustainability.

Another thing that will also be taken into account in the analysis will be the value added capacity of each grain and oilseed kilogram considering its industrial valorization, as well as in the transformation into the different animal protein alternatives, always thinking in the global consumer.

Everything indicates that in the medium term (10 years) Argentine farmland should abandon the idea of exporting without processing, without industrialization, without added value, in order to evolve into production systems where the primary producer will go beyond the farm gates recovering territorial competitiveness, progressing with development, with environmental and energy management, conserving natural resources, and getting involved and obtaining a fair distribution of the income that were able to generate through the vertical integration of the food chain.

Each milliliter of water stored in fertile soil with high photosynthetic capacity crops must be maximized, and that can not be achieved if the produced grain is industrialized and transformed many miles and sometimes thousands of miles away. In the near future the field productivity measure will no longer be kg/ha of grain, but market shelf added value/ha, or local jobs generated per hectare.

Below are only 3 schemes of vertical integration production models of possible implementation from the numerous combinations that can be achieved depending on many agro climatic factors considering different eco-regions. A group of INTA technicians distributed in 10 provinces and 14 experimental stations work to facilitate technically and operationally these ideas of vertical integrated business associations at the source, with direct involvement of the primary producer, so they can become a reality in the coming years.

The mayors of towns in the interior of the country that today see the future labor demand compromised, will have to take the lead in managing the best vertical integration projects for their area.

Future small and medium producers will be part owners of a large local agricultural food complex.

 

Figure 1: A model of agricultural production vertical integration, which integrates precision farming, sustainable grain and forage production, with primary industrialization, transformation traceability, beef and poultry processing and transport to reach the supermarkets shelves. 
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Figure 2: Another model of vertical integration where the primary grain production is transformed into pork and eggs, industrialized and transported to the supermarket shelf.
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Figure 3: Vertical integration of grain/forage agriculture for intensive production and industrial processing of milk, bioenergy production, environmental management and transport chain to the supermarkets shelf.
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In the three proposed models:

• Scheme 1: primarily pork and poultry production.
• Scheme 2: animal protein is present through eggs and pork meat.
• Scheme 3: cow milk is the center of the transformation.

The strategic basis is the association of many neighbor producers that are part of an Incorporated Company around an agricultural food complex, where the highlights are:

• Associative Scale (primary products competitiveness )
• Added value in origin (new jobs)
• Development of land with equity
• Generation of bioenergy (biogas and electricity), biofuels and biofertilizers
• Conservation of natural resources and environmental management 

Autor:
Ing. Agr. M.Sc. Mario Bragachini 
Coordinador de la Red del Proyecto Agricultura de Precisión y Máquinas Precisas 
Coordinador del Proyecto Específico Eficiencia de Cosecha 
INTA EEA Manfredi - E-mail: precop@correo.inta.gov.ar 
Junio de 2009