The Fleeting Truce Over Turkish Flour and New Investment in Argentina

I. Turkey and Wheat Flour

The first wheat mills are believed to have been used in the Anatolia region of Turkey, a wheat-producing country that today has harvest volumes similar to Argentina's (between 17 and 20 Mt per year). However, Turkish exports of wheat flour far exceed ours: in 2022 Turkey exported 3 Mt of wheat flour, making it the world's leading exporter with 27%, while our country exported only 0.43 Mt, representing 3.5% of the world total. Turkey's export performance rested on substantial wheat imports, leveraged by three support measures: a) the "Inward Processing Regime" with tax refund, b) an active foreign policy that secured the supply of Russian and Ukrainian wheat despite the two countries being at war, and c) market access to countries such as Iran, Iraq and Yemen. (1)

II. The Fleeting Trade Truce in the War Between Russia and Ukraine

Wheat supply for Turkey's milling industry came mainly from Ukraine and Russia, and when these countries went to war, that supply was put at risk. In response, Turkish President Tayyip Erdogan moved quickly to negotiate, under the umbrella of the UN, and secured a truce between the parties that allowed free navigation of grain ships. This enabled Turkey to maintain its position in the international flour market and, of course, to conduct international policy with its products for the purpose of food assistance to less developed countries. (2) Unfortunately, this truce was short-lived, but it ensured that for a couple of years wheat flowed smoothly to Turkish mills. (3)

III. Turkish Mills and the Argentine Mirror

There are more than 700 flour mills in Turkey with a capacity of 12 million tonnes. In Argentina, by contrast, 161 companies operate 204 plants, with Buenos Aires, Santa Fe, Córdoba and Entre Ríos being the provinces with the most installed industries. (4) In June 2024, the Turkish company Tanis, a manufacturer of flour milling equipment, announced an investment in the city of Casilda, Province of Santa Fe, in partnership with the local company Molino Casilda, owned by the Torresi family.

v. Opportunities for Argentine Agricultural Machinery

The Turkish government has launched the Southeastern Anatolia project, Turkey's largest agricultural development initiative (an investment of USD 200 billion). It will require agricultural equipment; operation, maintenance and management services; as well as storage, sorting and packaging facilities, irrigation equipment, hydroelectric power generation, urban and rural infrastructure, and development and services for forestry, education and health.

Conclusions

In this case we see how traditional diplomacy finds in foreign trade policy tools for its deployment, and how the two reinforce each other, strengthening the productive and industrial fabric of a country like Turkey, with far-reaching projections such as its companies' direct investments in Argentina.

The expansion of Turkish agricultural development also represents an opportunity for complementarity and for sales of Argentine agricultural machinery.

References:

(1) "Wheat flour exports as a first step toward continuing to add value in the wheat chain" ("Las exportaciones de harina de trigo como primer paso para seguir agregando valor en la cadena triguera"). Bruno Ferrari – Emilce Terré. BCR Weekly Information Bulletin. 24 Nov. 2023

( 2) " ANKARA, 21 Nov 2022 – Turkish President Tayyip Erdogan said he had agreed with Russian leader Vladimir Putin to produce flour in Turkey from Russian wheat and send it free of charge to the least developed countries to ease the global food crisis, broadcaster Haberturk reported." ( ) es.euronews.com

(3) "Erdogan points to those responsible for the breakdown of the Istanbul talks on Ukraine" esrt.press

(4)Source: National Directorate of Food and Beverages, with data from the National Directorate of Agricultural Trade Control, Ministry of Agroindustry - July 2018.

(5) "Turkish Investment Revolutionizes the Milling Industry in Casilda" 24-6-2024 novedadesdelsur.com.ar

(6) Analysis of trade and consumption prospects - CEI MRECIC

cancilleria.gob.ar

(7) Southeastern Anatolia Project en.gap.gov.tr . Ongoing projects:

Strengthening the regional industrial ecosystem

Integrated resource efficiency in agriculture and the agri-food industry.

Integrated Rural Development Project

Increasing the use of renewable energy resources and energy efficiency in the Southeastern Anatolia region.

Dissemination of precision agriculture and sustainable practices

Improvement of livestock infrastructure

Small-scale irrigation operations

Miscellaneous works

Organic agriculture cluster project

Agricultural infrastructure development

GAP Agricultural Training and Extension Project (GAP-TEYAP)