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Public-private interaction is paramount

Luis Basterra was present at ALASA 2020.

The Argentine Minister of Agriculture, Luis Basterra, was present at the XVI ALASA Latin American Congress, which took place from March 9 to 12 in the city of Mendoza.

 

Asked about the main challenges of agricultural insurance today, Basterra said that “the transfer of risk in agricultural production is a central issue. Too much time has passed in history in which a single actor has to take care of the conditions. In this sense, I value ALASA as an instance of taking responsibility for this issue and public-private interaction, since we are as a society facing a situation of impact of the effects of climate change. ”

 

For the representative of the agricultural portfolio, public-private interaction is essential. “The concept of a contradiction between public sector decisions and private sector decisions must be banished. We are in times of searching for spaces like this, of debate, of agreements and of consensus. The world is complicated and we have to be aware that it is necessary to take dimension of the acute international crisis, ”said Basterra. And he added “All of us who are linked to agricultural production must have the responsibility to do so with criteria of sustainability, respect for the environment and human health. It is a question that affects us all. ”

 

The legal framework in agricultural activity is also of vital importance when it comes to talking about production and sustainability. “Society is taking a level of consciousness and it is important that we have a guarantee of legal certainty when we do agricultural activities. And for this security framework to exist, we have to provide information and demonstrate that we do things well and, at the same time, develop models that are productive that aim progressively to demonstrate to society that we do so with sustainability criteria. This probably cannot be measured as an agricultural risk yet, but it is very important to keep in mind that a judge’s decision can have much more impact than the effect of hail or dry weather when an activity is prevented from taking place. carried out correctly ”explained the Minister.

 

Regarding the Emergency Law, Basterra was very critical and affirmed that it is a law that must be reformed. “It is a law that, in addition to being inopportune, is not fair in the way it arrives, it solves practically nothing, and there are many public resources that do not comply in order to resolve a contingency caused by climate action,” he emphasized and reiterated the need for public and private sector interaction. ” The public-private articulation is very important since it is defining so that we can build public policies. It cannot be built from the vision of one as a public official only or from the private sectorial vision ”.

 

The Argentine official also referred to another of the central themes of the Congress such as disruptive technologies and their importance for the agricultural sector. “The technologies that exist today, from satellite technology, work with drones, overflights to identify lots, see the evolution of crops, allow us to see a large number of alternatives so that whoever wishes to take the risk can be the one to receive that transfer that It will be good for the stability of the agricultural company “. And added “This in a system of a lot of information and transparency is going to allow a new game to be played where the actors can each play their role.”

 

“This is the creativity that we have to put in, we have to look for how insurers, who live by imagining the possibilities that someone may assume the risk, get the producer to move forward until transferring it. More instruments need to be developed to make them accessible. Awareness is still far away As a national state, we are committed to deepening this issue, since we understand that it is one of the elements that most complicates production, requiring greater stability in an activity that has variability, ”he stated.

 

Finally, Luis Basterra listed the challenges ahead for the Argentine government in agriculture. “We aspire to continue growing in production, to have production with producers, that it is not a business only for some, leaving small producers on the way, that the risk of prices and environmental irrigation is tempered, that the transfer system of irrigation and that we can have much more production that is based on the development of work, distribution of wealth, and that we can think of an Argentina with very great progress ahead ”.

The contribution of technology to insurers

For the first time, ALASA, in its International Congress of Agricultural Insurance Mendoza 2020, will have a space for entrepreneurs who can demonstrate how technologies are transforming the agriculture business.

 

The incessant progress, the instantaneousness in the information and the immediate solution to questions that were previously unthinkable, demand a permanent update for which not everyone is prepared. Dissemination, training and knowledge become the closest challenge to carry out.

 

Asked about the main contribution of new technologies to insurance companies, Federico Mayer, CEO & Founder of Club Ag Tech, argued that “the main contribution in this industry or in any sector is the ability to generate large volumes of information and process them at high speeds. To be able to show us things that we couldn’t see before and also to do them in real time or very briefly ”.

 

To demonstrate and exemplify the results of advances in technology, one can observe what happens with the green index where one, through digitization, can see and measure it, that is, take an indicator. And in this way to be able to observe specific moments of the crop cycle. This was previously impossible and the data that was measured and recorded were those of yield.

 

Regarding the challenges of the sector itself, of the insurance industry, Mayer affirmed that “the most urgent thing is to become massive, especially in Latin America. To be able to be in every hectare and in every production. This does not currently occur due to a cost issue. And it is there where technologies have to act to be able to download them and make services available since, where before a lot of manpower was needed to be able to manage, today technology allows it to be done with much less resources ”.

 

In the case of insurance, these tools generate the possibility of finding mechanisms or solutions to ensure activities that previously did not have the possibility of transferring risk.

 

The technologies are going to be able to allow segmentations almost to the unit of products, made to measure. This will be manageable, generating benefits not only for the producer but also for the companies. And it is there where we find one of the great achievements that digitization generates.

 

But as we clarified at the beginning, adapting to the incessant flow of information due to the advance of digitization in all areas is not easy. For Mayer, the main obstacle seen in all industries, and surely insurance is not the exception at the corporate level, are cultural issues. “Most of the people who work in the sector today, were formed by an analog world and this digital world has a lot of characteristics that are difficult to understand because our” setting “is different,” said the Agricultural Production Engineer.

 

The issue of the digital divide is key, “it is like literacy in the Sarmiento era”, he analyzed and added, “It is not necessary for everyone to know how to program, but they must be aware of the benefits or benefits that this new language can allow us. I speak of language because the digital world is that, a language that allows us not only to describe something but to replicate it, something that does not happen with English, Spanish or Chinese ”.

 

“We have a huge quest ahead to digitally alphabetize customers and suppliers so that we as a chain can be more efficient and generate more value,” he emphasized. However, with regard to this almost urgent objective, Mayer considered with concern that “there is no awareness among employers of need regarding this issue.”

The effects of coronavirus in the agricultural sector

The Coronavirus pandemic put the world economy in a crisis with unthinkable and hitherto incalculable consequences. The measures that the different countries adopt to combat the advance of COVID-19 have abruptly slowed down the world economy, which was already unstable due to relations between the United States and China. It is the first time in history that millions of people stay in their homes, causing this to cause a sharp drop in consumption and production, leading to war economy levels.

According to the latest estimates from the main international consultancies, growth of just 0.5% for the global economy is expected for this year, with zero growth in China and a deep recession in Europe. In Latin America the situation will be much more complex, with an economy that was already in recession, and with very little scope for economic policy to prevent the measures taken to reduce the spread of the virus from causing the crisis to deepen.

“It is important for countries to act together both during the crisis and on its way out, with special treatment for the most vulnerable countries,” highlights a report by the INAI Foundation. “One of the main tasks that world leaders have is to prevent trade flows from being affected by protectionist measures, because this will aggravate the situation and hinder recovery,” said the report.

In this sense, activity in the agri-food chain must be constant and uninterrupted, taking the necessary measures to protect the health of workers, taking into account that it has been declared essential in most countries. As has happened in other crises, in fear of the lack of products and the rise in prices, importing countries tend to advance and increase their purchases, and exporters to restrict their exports, which ends up causing the rise in prices that precisely it sought to anticipate, which in turn results in new restrictive measures that ultimately lead to a global food security crisis.

The INAI Foundation reviews various studies that have shown that during the episodes of high volatility and spikes in agricultural product prices in 2007/08 and 2011/12, the policies adopted by the different countries with the aim of protecting themselves from this situation had the effect On the contrary, exacerbating the movements of the prices.
An example of this is what is currently happening in Russia and Ukraine where they began to limit their exports with the aim of protecting the domestic supply of food.

South America

For South America, ECLAC foresees a 5.2% drop. Some countries in this subregion are severely affected by the decline in activity in China, which is an important market for their exports of goods. “South America will also be affected by the drop in the prices of basic products,” he highlights.

In most South American countries, the drop in GDP would be between 5 and 6%. The worst drop in the region would be Venezuela, with a contraction of 18% due to the sharp drop in oil.

The immediate effects of the coronavirus on agricultural activity will be problems in product placement, especially those that depend on exports, and the situation on the domestic market will be uneven. It is to be expected that real prices will fall in the domestic market due to the reduction of purchasing power and that international prices will fall due to the fall in demand and economic problems in the world. However, due to the effect of the exchange rate and stimulus policies in the rest of the world, the worsening of the internal market will be greater than that of the external one.

It is a priority today to implement mechanisms to continue producing and that there is no shortage and that governments work to guarantee the continuity of trade in their agri-food products to the world and promote coordination mechanisms that prevent individual policies from leading us to an even deeper crisis.

Unexpected side effects

The historical fall in the value of oil, reaching unprecedented negative figures, had its negative impact on international corn prices, which reached the lowest levels in the last 10 years, due to the lower demand for ethanol.

Corn prices fell due to the sharp reduction in demand in the United States for ethanol production.

Corn is the necessary input for the production of ethanol, which replaces the consumption of petroleum derivatives. But oil is also related to the production and transfer of grains and oilseeds to the different marketing centers.

Currently the ethanol industry is going through a crisis process in the United States, considering that more than 90% of the gasoline in that country contains ethanol.

Another unexpected fact, as a result of the COVID-19 pandemic, is the price of wheat, which exceeded that of soybeans. The global demand crisis that the pandemic is generating hits much harder on the oilseed than on the cereal.

Not being an input used for the production of biofuels, an industry that is going through a deep crisis worldwide, involving soybeans (as well as corn), wheat does not show any weakness on the demand side, which is coming growing at a slow but steady rate year after year.

Although the world wheat stocks are not low, the market interprets the present situation as risky for normal supply, which is related to the incipient changes in consumption patterns. Changes in diets are also being seen in some societies, with a decrease in the consumption of meat (animals fed on corn and soybeans) and an increase in cereals such as wheat.

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