Agricultural companies in default: the countryside is creaking

The failure to pay a negotiable obligation by the emblematic company that provides agricultural inputs and services “Los Grobo” shook the financial market and surprised everyone. Not so much because this cannot happen (there are plenty of reasons), but because of the amount of the default: what the company failed to pay is a promissory note of $100,000. Although he told the National Securities Commission that he will not face other maturities, between now and March, for An additional 10 million dollars.

This is a low figure if one considers that the fund Victoria Capitalwhich acquired most of the shareholding a few years ago, has been invested in it 200 million dollarss. And that in these same days the company is celebrating 40 years of life, with several events in its different branches throughout the Pampas region. Would shareholders let it fall?

The problem starts in a related company, Agrofinadedicated to the formulation of crop protection products. Los Grobo not only sells and finances these agrochemicals, but the entire range of inputs (seeds, fertilizers) that modern agricultural production requires. It is one of the largest in the field.

The Grobo are not alone. A few days ago another important company in the sector fell: Red Surcosfrom the Santa Fe Calvo family. He also could not afford the ON payment. Beyond the local financial context with all its complexities, the backdrop is the income crisis of the final recipients of these inputs and services. The field is going through the perfect storm.

Two years (2022 and 2023) of severe droughts. 2024 was somewhat better from a climatic point of view, but a pest took away a third of the corn crop: 20 million tons, worth 3 billion dollars. On, International prices fell by 30%. And despite this, the government pushed forward the much-discussed issue of export duties. (the famous retentions). Thus, despite the income crisis, the State continues to capture 33% of soybeans, and 12% of other “pamphumed” crops.

This is the real backdrop to the financial crisis of technology input suppliers. Falling prices are impacting farmers around the world. This same week, the United States Congress approved an urgent aid package, for 10,000 million dollars, to inject liquidity to farmers. It is the same that the Argentine government put in the 2025 budget as withholdings. An obscene contrast.

And Washington also approved sending them another 20 billion in the next 90 days as compensation for natural catastrophes (drought, fires), which are added to the 200,000 million annual subsidies. The measure was received with relief by farmers, but also by the supplying industry, and the companies that market agricultural products, are suffering from the crisis.

Among inputs, the adjustment is fierce: Bayer and Corteva, the two giants, are in severe cost reduction programs. John Deere, the world’s leading agricultural machinery company, laid off 16,000 employees worldwide. Cargill also announced a workforce reduction program.

Argentine agriculture is the most competitive on the planet. Starting from a powerful technological revolution, based on new practices such as “direct sowing”, biotechnology and correct crop nutrition, a spectacular increase in yields per hectare and a strong reduction in cost per unit of product obtained was achieved. . But this implies investment. And to invest, a complex financial wheel has to work. If at the end of the road “there is no money”, or it is not enough, the whole system creaks. It’s what’s happening.

Luckily, this season the crops are evolving well.. The fine harvest (wheat and barley) has made great progress and the lots of corn and soybeans look very nice. But the field “is gasping.” The default of these companies is a wake-up call to the government. Relief can’t wait.