USDBC Argentina Harvest and Trade Mission Report June 4 9, 2017

USDBC Argentina Harvest and Trade Mission Report June 4 9, 2017 In Salta Province, Argentina, L R: Roman Kutnowski (USDBC Regional Representative, Ellen Levinson (USDBC International Representative), Marco Antonio Macina (Local Producer), Cindi Allen (U.S. Producer) and Esteban Guerineau (Agronomist for a local farm) Submitted by Ellen Levinson, USDBC, to USDA Foreign Agricultural Service

TABLE OF CONTENTS Page 3 Page 6 Page 15 Page 25 1. Trip Overview 1.1 Trip Summary 1.2 Objectives 1.3 Results 1.4 Recommendations 2. Market Information 2.1 Background 2.2 Dry Bean Exports 2.3 Exports by Bean Type 2.4 Dry Bean Growing Regions 2.5 Production 2.6 Transportation 3. Harvest Report 3.1 Examples from Field Visits 3.2 2016 Production/Province 3.3 2017 Projections 4. Visits and Notes Pictures from Argentine fields, June 5 8, clockwise from top right: alubia beans, cranberry beans, dark red kidney beans, white mold found in a black bean field and black beans. 2 P age

1. Trip Overview 1.1 Trip Summary Title: Start Date: June 4, 2017 End Date: June 10, 2017 Countries: USDBC Argentina Harvest and Trade Mission Argentina USDBC Representatives: Cynthia (Cindi) Allen, Grower, NE; Roman Kutnowski, Regional Representative for Americas (except Mexico); Ellen Levinson, USDBC International Representative for the Americas (except Mexico) & Emerging Markets Itinerary: June 4 5 Buenos Aires June 6 Visit fields near Road 34 from Termas de Rio Hondo to Rosario de la Frontera June 7 Visit processor and fields from Rosario de la Frontera to General Guemes June 8 Visit Salta Province, including a processor and fields Road 5 June 9 Visit fields in Salta Province June 10 Return to U.S. 1.2 Objectives Meet with growers, agronomists, processors, brokers and traders to better understand the dry bean value chain and international marketing. Assess and report on thee 2017 dry bean harvest, which was getting underway as we visited. Conduct market research to determine production and market trends. 1.3 Findings 1.3.1 Meetings and field visits Meetings with six companies involved in processing dry beans and trading them globally: three in Buenos Aires, one in Metan Viejo, Salta, one in Pampa Blanca, Jujuy, and one in Salta, Salta. Meeting with one broker in Buenos Aires who trades internationally. Meetings with 50 farmers and agronomists in the growing areas and visited fields at 12 different sites. 3 P age

4 P age 1.3.2 Key Findings Last year, Argentina s high volume dry bean sales to Brazil at good prices resulted in little exportable carryover stocks and stimulated increased planting in 2017. Estimated total 2017 seeded area is 438,000 hectares up 6.5% from last year. Planting was higher in beans that sold well to Brazil blacks, cranberries and dark red kidneys. Alubia bean hectares were also higher; they are mainly exported to Algeria, Italy, Turkey, Spain and Portugal. Due to favorable weather conditions during the vegetative growth stage, until mid May the Argentine bean crop was progressing well. At that point, overall production was expected to reach record levels. However, this picture changed in mid May when persistent rains triggered white mold disease, which is caused by Sclerotinia sclerotiorum, a soil fungus. Seed technology has not been updated in many years and farmers mainly save their best beans to use as seed the following year. Farmers talked about the lack of high yielding, disease resistant certified seeds and noted that this led to poor uniformity in size and shape. Large farmers seek vertical integration. This is causing a shift in business models, with processors partnering with producers or adding production to their portfolios and farmers adding processing and trade to their business. Farming is mainly a family business and it is common for farmers children to stay in farming or agricultural related business. Northern region crop: Beans north of the Bermejo River were affected by white mold. This is where 90% of Argentina s alubia (white) beans and most of the colored beans cranberry beans, dark red kidney beans and light red kidney beans are grown. Due to positive conditions prior to the onset of mold, the damage was limited and overall year yields will be higher than 2016. Production of all bean types is expected to be 15 18% above 2016. Southern region crop: South of Guemes City there was favorable weather throughout the growing period with isolated cases of white mold. This is predominantly a black bean growing region. There was increased acreage and better yields and quality than the 2016 crop, with an expected a 10 14% increase in total black bean production compared to last year. Most of the black bean crop is trucked over the border to Brazil at Foz do Iguaçu. Brazil s second harvest in Parana, the main black bean growing state, was hit by rain damage close to harvest. During our Argentina trade mission, Brazilians were in the market for Argentina s black beans, offering prices around $900/MT FOB border 50% up from the previous month tracking prices on the Sao Paulo Bolsinha. At the end of June Brazilian black bean prices were starting to fall because the impact of the quality and yield issues in Parana had already been taken into account in the market and now it was reacting to the good black bean harvest in Argentina. By the beginning of July, black bean prices declined 2.5 4.7%. Argentina s black bean crop is expected to supply the Brazilian market through August or so. In June some Brazilian black bean packagers had already bought black beans from Argentina. Due to limited exportable carryover stocks in Argentina, quality issues with the second black bean harvest in Parana, Brazil, and less robust Chinese production, there should be opportunity for U.S. suppliers to enter the Brazil market with black beans later this year. USDBC s increased interaction with Brazilian buyers has facilitated better relationships and

knowledge. We are aware of at least one Brazilian buyer who already contracted for U.S. black beans for September/October delivery. Because of the NAFTA renegotiations, there are discussions with Mexico about developing dry bean partnerships. The Argentine Minister of Agriculture is organizing a Mexican trade mission for September 2017. Two processors said they are trying to introduce improved dark red kidney beans that have better canning qualities. However, getting new seeds introduced and regularly used is difficult since there is an underdeveloped certified seed business in the country and farmers mostly use saved beans as seed. 1.4 Recommendations 1.4.1 Opportunities Argentina s productivity and uniformity of product lags behind the U.S. due to poor seed quality, lack of a strong research, development and extension sector, and limited plant protection and desiccant product choices. Argentine dry bean producers appreciate USDBC visits and the opportunity to discuss their faming system and ours. Argentine processors and traders are also interested in sharing information about trends. 1.4.2 Challenges Argentina has large plots of land dedicated to dry bean production, but only consumes about 3 percent of the crop, making it one of the largest dry bean exporters in the world and directly competitive with the U.S. in white, black, cranberry and dark red kidney bean markets. Argentine Government statistics for dry bean production are not reliable or accurate. If USDBC s trade mission occurs when harvest is in full swing, it could be difficult to have meetings with the agronomists and farmers and conduct field assessments in the countryside. Due to Mercosur membership as well as proximity, Argentina is Brazil s main source of imported black beans, cranberry beans and dark red kidney beans. The government lifted hard currency controls and export taxes, which has made Argentine dry beans more trade competitive. 1.4.3 Recommendations USDBC should continue its harvest trips in order to assess the size and quality of Argentina s crop and to maintain relationships with the dry bean industry in that country. Following the Argentina harvest trip with the Brazil trade mission is an excellent way to get information from both sides of the border at a critical point in the marketing cycle right after Argentina s harvest and as Brazil s second harvest is winding down. It may be necessary to adjust the date of the Argentina harvest trip from year to year depending on when farmers completed planting and seasonal conditions. If Brazil s Forum do Feijao occurs in the third or fourth week of June, then, as with this year, Brazil and Argentina would likely need to be two separate trade missions. 5 P age

2. Market Information Argentina 2.I Background Argentina s population is just shy of 44 million and 92 percent of the people are urban dwellers. Currently arable land is 13.9 percent, but more land could be put into production. The CIA Factbook notes that Argentina has rich natural resources, a highly literate population, an export oriented agricultural sector, and a diversified industrial base. Yet, the country experienced recurring economic crises and in 2016, the World Bank downgraded Argentina from a high income to upper middleincome economy, on par with Columbia. Its per capita income is $20,200. Along with Brazil, Argentina plays a leading role in the Southern Cone Common Market (Mercosur). As a Mercosur member, it enjoys duty free exports to Mercosur member countries. Its main export market is Brazil, which regularly requires imports to meet demand. Thus, planting trends in Argentina closely follow the Brazil market, particularly for black beans. Argentina was the top dry bean exporter in 2015 16 exceeding both the United States and China due to a good harvest, reduced production in China and increased demand from Brazil, which had a poor harvest. Other favorable factors were policy changes initiated by President Marci s Administration at the end of 2016, most notably the removal of currency controls that limited the amount of pesos that could be changes into dollars and other currencies and overvalued the peso. The 2017 dry bean harvest is winding down in Argentina: dry bean seeding is up and higher yields (10 14% for black beans, 15 20% for alubia beans) and quality are expected compared to 2016. 6 P age

2.2 Dry Bean Exports Argentina has one dry bean crop each year with harvest from the end of May through the first few weeks of June. According to the Argentine Pulses Chamber (Camara de Legumbres de la Republica Argentina, CLERA), Argentina usually exports 97% of it bean crop and the remaining 3% is consumed domestically. Global Dry Bean Exports, Top 9 Countries, MT Source: Global Trade Atlas and FAS GATS Argentina increased market penetration in Mediterranean markets (especially Algeria, Italy, Turkey, Spain and Portugal) and in Pakistan. Its main exports are black beans and alubia (white) beans, but it is an important player in mung, cranberry and red kidney bean markets as well. In 2015/16, Argentina s dry bean exports increased by 69% and, on average, prices increased by 50% compared to the previous year. Black bean sales to Brazil accounted for most of that increase. 7 P age

Argentina Dry Bean Export Destinations, 2013/14; 2014/15 and 2015/16 (MT) Partner 2013/14 2014/15 2015/16 14-15 vs 15-16 World 120,312 283,037 477,542 168.72% Brazil 72,257 116,259 209,085 179.84% Algeria 5,140 20,505 40,818 199.06% Italy 8,684 23,831 30,508 128.02% Turkey 3,363 9,055 23,581 260.42% Spain 8,443 29,038 36,160 124.53% Venezuela 7,349 35,571 32,913 92.53% Portugal 3,715 9,759 24,185 247.82% Pakistan 230 2,869 14,016 488.53% Israel 983 4,227 4,527 107.10% Guatemala 41 4,140 3,750 90.58% Philippines 461 581 530 91.22% Source: Global Trade Atlas Argentina Dry Bean Exports to Main Partners, 2013 14, 2014 15, and 2015 16 (MT) Source: Global Trade Atlas Chickpeas are not included in the figures above, but the area dedicated to that crop is increasing. Some of the growth is in regions not far from Buenos Aires, but we also saw and were told about chickpeas being planted instead of wheat as a winter crop in the more arid dry bean growing regions. They are mainly exported to India, Pakistan and Turkey. 8 P age

2.3 Exports by Bean Type July 2016 April 2017 Black Beans A large majority of Argentina s black beans are exported to Brazil because delivery over the border can happen within days or a week and because as a fellow Mercosur member, Brazil can import dry beans duty free. They are shipped by truck through the city of Puerto Iguazu to Foz do Iguazu in Brazil, which is 900 1,000 miles from the main Argentine black bean growing area. This relatively easy access is a main competitive advantage in the rapidly changing Brazilian bean market. 9 P age Argentina Black Bean Exports, July 2016 April 2017 Country MT Share Brazil 112,183 93.1% Venezuela 2,829 2.3% Chile 942 0.8% Guatemala 4,148 3.4% United States 448 0.4% TOTAL 120,550 100.0% Source: Global Trade Atlas and Customs Information Traders informed us that some black beans enter Brazil country without passing through customs, mainly to avoid issues on the Brazilian side. However, this practice is less common now than several years ago. Alubia Beans Mediterranean markets are the main destination for Argentine alubia beans. Since most of them are shipped through the port of Buenos Aires, official figures are a reliable source of information. The top five destinations between July 2016 and April 2017 were Algeria, Turkey, Spain, Italy and Brazil, which together, accounted for 79.6% of Argentina s total alubia bean exports. Argentina Alubia Bean Exports, July 2016 April 2017 Country MT Share Algeria 31,315 23.2% Turkey 26,036 19.3% Spain 20,244 15.0% Italy 18,702 13.9% Brazil 11,060 8.2% Portugal 5,519 4.1% France 2,467 1.8% Israel 2,048 1.5% Egypt 3,026 2.2% Iraq 2,079 1.5% TOTAL 134,980 100.0% Source: GTS and Customs. HS Codes 0713.33.29.190, 0713.33.29.111, 0713.33.29.113, 0713.33.29.112.

Cranberry Beans Argentine dry bean exports under HS Code 0713.33.99.929 between July 2016 and April 2017 reached 14,305 MT, with Brazil taking 8,737 MT (61.1%) of total exports. The 2016 crop was sold out in March. Light Red Kidney Beans Argentina Cranberry Bean Exports, July 2016 April 2017 Country MT Share Brazil 8,737 61.1% Italy 1,273 8.9% Spain 1,062 7.4% Croatia 658 4.6% Turkey 567 4.0% Pakistan 370 2.6% USA 200 1.4% Portugal 207 1.4% France 129 0.9% Uruguay 133 0.9% TOTAL 14,305 100.0% Source: Argentine exports under HS Code 0713.33.99.929 Of all Argentine bean types, light red kidney beans were the least popular in 2016/17. LRKB shipments stood at 10,051 MT. Venezuela, UAE, and Pakistan (in that order) were the three main destinations, accounting for 47.3% of total shipments. Argentina LRKB Exports, July 2016 April 2017 Country MT Share Venezuela 1,935 19.3% UAE 1,587 15.8% Portugal 1,224 12.2% Pakistan 1,365 13.6% Colombia 644 6.4% Panama 488 4.9% Haiti 737 7.3% Jamaica 606 6.0% Brazil 212 2.1% USA 196 2.0% TOTAL 10,051 100.0% Source: Argentine exports under HS Code 0713.33.99.112 10 P age

Dark Red Kidney Beans Argentine dark red kidney beans enjoyed high buying interest between July 2016 and April 2017, mainly due to the production shortfall in Brazil: nearly half went to Brazil. 2.4 Dry Bean Growing Regions Argentina DRKB Exports, July 2016 April 2017 Country MT Share Brazil 8,350 49.1% Pakistan 2,777 16.3% Italy 1,143 6.7% Spain 953 5.6% Israel 493 2.9% Portugal 551 3.2% Russia 542 3.2% Turkey 354 2.1% Angola 309 1.8% France 299 1.8% TOTAL 17,007 100.0% Source: Argentine exports under HS Code 0713.33.99.122 Argentine dry beans are grown in the Northwest of the country mainly in the Provinces of Salta, Jujuy and Tucuman. Within the year they are rotated with other crops, such as soybeans, sugar cane, wheat or corn. Wheat is mainly a winter crop and chickpeas are taking over some of that acreage. There are two production regions, the Northern Region is north of General Guemes city in Salta province and the Southern Region is south of that city. Southern Region characteristics: Located in Tucuman province, southern Salta province and a small part of western Santiago province, this is where most black beans are produced. Between 500 to 950 mm of rainfall/year. Beans are usually planted in January. Farming operations generally range from 300 to 12,000 ha. Yields vary year to year, with black bean yields averaging 1.2 1.4 MT/ha; 1 MT/ha. is considered below average and 2 MT/ ha. is considered excellent. Nearly all the black beans are sold to Brazil through the border crossing at Foz do Iguazu and Brazilian buyers often negotiate directly with the Argentine producers. Some may cross the border without clearing customs, but that practice seems to be in decline. 11 P age

Northern Region characteristics: Located in Central and Northern Salta province and Jujuy province, this where alubia (white) bean production is concentrated. Colored beans cranberry, light red kidneys and dark red kidneys are also concentrated here. Beans are usually seeded between February and the first half of March. The climate is semi arid to dry sub humid. Operations are generally larger than in the south, some reaching 20,000 to 30,000 ha. Alubia yields are typically between 1 1.3 MT/ha. Most alubias are trucked, and some are railed, to Buenos Aires and shipped to overseas markets, such as Italy, Spain, Turkey and Algeria. 2.5 Production This year, there was no rain in the first half of February so many farmers delayed planting, starting in mid February in the Metan area (Southern Region) and in March in the Northern Region. The rains that hit in April and May complicated the harvest. It also made it hard to spray with fungicide. Because of the dry climate, white mold is not common in the north. When it hit this May, they were not as well prepared to deal with it as producers in the south. Agronomists mentioned several types of chemicals that are used for crop protection, such as Bayer SPHERE and BASF herbicides. Nonetheless, farmers noted that they do not have access to some of the crop protection products that are available in the U.S. and Canada since those products are not registered in Argentina. This may be due to agribusiness concerns that their dossiers with proprietary product information will not be adequately protected by the Argentine government during the registration review and approval process. Certain diseases and infestation are problems because they are behind in developing resistant seeds. According to farmers, seed technology has not been improved in a dozen years and their seeds are not treated. Some farmers obtain new seed for a small portion of their crop and then sell seed to others, but overall farmers use saved seed from the previous crop for their new crop. This is the main reason cited for limited yields. Some farmers said it is their own fault that better seeds are not developed. The research station at Tucuman, for example, has a connection with CIAT and can develop better varieties of black beans. When they develop a new bean type, a farmer will buy it and transfer it to others, but farmers do not want to pay the royalties associated with certified black bean seeds, so a quality seed business cannot develop. In the Southern dry bean region, we were told the average cost of production is $300 400/MT. 12 P age

Dry bean farmers save their best seeds from one harvest for planting next year s crop. Farmers reported holding 15 20% of their beans. It is common to reuse the same seed stock for up to ten years, which limits yield potential and reduces uniformity and overall quality of the beans. Left: Due to the use of the same seeds year after year, it is normal to find issues with the uniformity of the beans. This picture is of 2017 crop alubias in Salta. Rather than obtaining certified seed, farmers will buy new seed from another producer at a price that is one third higher than the cost of processed beans. In February 2017 seed prices were: $1,200/MT (black beans); $1,600 to $2,000 for alubia beans; $1,000 to $1,200 for red kidney beans and light red kidney beans; $1,000 for mung beans. Cranberry Seeds LRK Seeds Black Bean Seeds Alubia Seeds Most farmers and agronomists reported that glyphosate is used to control weeds and paraquat is used to defoliate the bean plants. Direct harvest is commonly used in the Southern Region where black beans predominate. Farmers usually do not own their equipment. Instead, they contract with Harvesters who own the equipment and follow the harvest. Harvesters first hit more southern areas of Argentina for the main soybean harvest and then move into the Southern dry bean region in time for harvest. In the Northern Region, where alubia beans predominate and colored beans are more common, indirect harvest can also be seen. It was late spring and we saw recently planted wheat and corn and sugar cane close to harvest. In drier areas chickpeas are increasingly being sown as a winter crop alternative to wheat. An interesting feature of Argentine harvests is that beans are sometimes cleaned in the field using machines called chamiqueros. Beans may be sold or stored in warehouses or in heavy polyurethane sausages that are left in the fields. 13 P age

Above left is a chamiquero, used for cleaning beans in the field. On the right is a picture of Cindi Allen (Grower, USDBC), Frederico Seiler (Argentine farmer) and Ellen Levinson (USDBC) in front of on farm sausage storage (which was not storing dry beans). 2.6 Transportation There are two main routes for exporters: seaports to overseas destinations (nearly all white beans exit this route) and overland at the border with Brazil through Foz do Iguazu (nearly all black beans exit this route). Transportation is a big challenge for the Argentine dry bean industry. Trucking costs from the fields to the exporter's facility and then to Buenos Aires port increase significantly total export costs. Internal freight cost can be twice as much compared to the shipping cost to Mediterranean ports from Buenos Aires. Estimated trucking cost per MT: From Metan (Salta) to Buenos Aires port: US$ 70/MT From Perico (Jujuy) to Buenos Aires port: $75/MT Argentina's President Mauricio Macri, who took office December 2015, announced the launch of the Belgrano Infrastructure Plan in the Northwest soon after taking office. The project, which would include new roads and railways in the region, could help tackle some of these transportation issues. However, 15 months after the announcement of the plan, there are still no signs of infrastructure improvements that could increase the competitiveness of the Argentine Northwest. 14 P age

3. 2017 Harvest Report An Interactive Map of the Trade Mission s Harvest Tour, including descriptions of each of the fields visited, along with estimated yields and photographs, can be found here: https://drive.google.com/open?id=1q_sjifxsieitmtxvrb776cz2ewa&usp=sharing. Left: Cindi Allen (Grower, USDBC) with Frederico Seiler, Argentine farmer. Right, Roman Kutnowski (USDBC) with Nicolas Casal (Agronomist for Seiler farms) in dry bean fields in the Southern growing region. 3.1 Examples from the Harvest Field Visits 3.1.1 Fields 1 3: Southern Region, Tucuman & Santiago Provinces In the Southern Region, where the majority of black beans are produced, we first visited the Seiler family s fields. They have 12,000 ha. spread over a couple of provinces. Roads are in poor condition and transportation for long distances between fields is costly and time consuming. They own planes to make it easier to cover the distance between fields. In 2016, the farm averaged about 1 MT/ha., but this year they expect an average of 1.3 1.5 MT/ha. Beans are grown in 21 inch rows and typically apply defoliants before they harvest. They pay $60/ha. for Harvesters, about 12% of production costs. It rains 500 mm/year in the summer months (especially December) and there is no rain in the winter. Fields closer to the mountains had more rain than usual this year (600 mm) and there was some white mold. Wheat is grown in the winter and only receives moisture from the soil. 15 P age

Above, Field 1 in Tucuman Province: Frederico Seiler, farmer, and Ellen Levinson, USDBC, viewing the field. No damage, but the Seiler family had just taken over this 200 ha. field and expected 1 MT/ha., a low yield for the season, with 16% moisture. Below, Field 2, in Santiago del Estero Province, is 200 ha. and expected yield is 1.8 MT/ha. 16 P age

Right: Field 3 is 250 ha. located near the mountains. It had some white mold, but is expected to have yields of 1.5 MT/ha. 3.1.2 Fields 4 5, Southern Region, Salta Province We were told that Field 4, in the Metan area of Salta province, is expected to produce about 1.2 MT/ha. of black beans this year, but if the total field was like the part we saw, it would produce less than that. The field was 30 ha. and the hardpan is representative of a problem they have in that area with depleted soils. Below left: The soil in Field 4 is an example of hardpan that resulted from constant farming without restoring organic matter. Rotation with a winter cover crop and no till are used to improve soil quality. Below right: The beans are not uniform since no new seeds have been introduced in about 10 year. We were told by an agronomist that expected yield is 1.2 MT/ha. 17 P age

Field 5, below, is 500 ha. and 300 ha. are currently planted with beans. It was also planted with saved seed, so the beans are not uniform, but the soil is better and the expected yield is 1.5 MT/ha. 18 P age

3.1.3 Field VII, Northern Region, Salta Province This Northern Region field was planted with 3,000 ha. of beans in 2017: alubia (1,700 ha), mung (500 ha), black (250 ha), DRK (250 ha) and cranberry (300 ha). It is one of the more productive fields in the Northern Region, with an average yield of 1.2 MT/ha., but this year, due to the good weather and growing conditions, is expected to yield 1.8 MT/ha. Left: Beans in Field VII have been cut and piled in preparation for harvest. Below are pictures of the dark red kidney beans, alubia beans and cranberry beans from this field. 19 P age

3.1.4 Field XI, Northern Region in northern Salta Province This field is in the northern part of Salta Province, close to the City of General Ballivian, where white mold issues were reported. Yet, estimated yields were good: 1.7 MT/ha. for alubia beans and1.2 MT/ha. for cranberry beans. 3.2 2016 Production Estimates by Province (Source: CLERA) 2016 Alubia Bean Production by Province 2016 Black Bean Production by Province 20 P age

2016 Colored Bean Production by Province 3.3 2017 Projected Dry Bean Production & Exportable Supplies 3.3.1 Production History and Projections 700,000 Argentina Dry Bean Production 10 Years 600,000 500,000 400,000 300,000 200,000 100,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017(f) Planted (ha) Production (MT) Source: USDBC As seen on the chart above, dry bean production in Argentina remained fairly stable between 2006 and 2013, when a historic drought led to the worst dry bean campaign ever, with yields of around 0.3 MT/ha. In 2014, 2015 and 2016, dry bean production increased from the 2006 2012 average. We anticipate this upward trend will continue in 2017 due to increased acreage and aboveaverage yields. Overall, Argentina s 2017 dry bean production will be 10 15% higher than last year. 21 P age

500,000 Argentina Main Dry Bean Types Area (2016 vs 2017) 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2016 2017p 22 P age Alubia Black Bean Mung Bean Cranberry DRK LRK Source: USDBC Total seeded area in 2017 is estimated at 438,000 hectares compared to 411,100 last year (up by 6.5%). 3.3.2 Area, Production, and Exportable Supplies by Bean Type Information and Assumptions Used for Estimations There is one dry bean harvest in Argentina each year and the Argentine marketing year is July 1 through June 30. 2016 planted area and production are derived from previous USDBC harvest and production reports and CLERA (Chamber of Pulses of the Argentine Republic) data. 2016 exportable supply is based on previous USDBC reports and the most recent information for exports (from Customs data through April and USDBC discussions with the trade) and carryover (production minus exports, plus on ground observations and discussions with the trade). o According to growers, traders and exporters, some beans enter Brazil without clearing Customs. This practice seems to be diminishing, but can still be a factor for Customs data underestimating black bean exports and, to a lesser degree, colored beans, particularly cranberries. 2017 planted area and production are USDBC estimates based on field visits at the start of the season and this Trade Mission s visits and discussions, as well as discussions with Brazilian buyers. 2017 exportable supply is based on USDBC estimated production for the year plus previous year exportable carryover, minus estimated loss, domestic consumption (3 4%) and estimated amount of beans held for seed or future sale (differs by bean type, but generally 15 20%).

o Exportable carryover from the 2016 crop is nil or close to it for the bean types reported below. o Farmers hold back seed for the next year s crop and some farmers hold back additional amounts for other purposes, for instance to sell as seed since seed prices are about one third above bean prices. o On farm storage options and off farm warehousing are generally limited, most notably for black beans since most are trucked over the border to Brazil. o Particularly in the alubia bean areas, vertical integration of production processing and trading is increasing. Large farms often have their own or partnerships with warehousing, processing and marketing/trading operations, since their beans are mostly transported to Buenos Aires port for overseas destinations. Alubia Bean Estimates Alubias are grown mainly in the north of Salta and Jujuy in semi arid and dry sub humid areas where farmers do not have many alternative crops for summer. Thus, the area under alubia beans tends to remain fairly stable. We expect plantings to be above historical averages and up 6 7% from last year. Average to above average yields in the main alubia bean growing area will result in a production increase of 15 20% compared to last year. Exportable supplies will be curbed by quality issues associated with white mold disease, saving the best beans for seed and insignificant carryover from 2016. Year Planted Area Production Exportable Supply Exports Jul 16 Apr 17 2016 150,000 175,000 135,500 134,980 2017p 160,000 205,000 158,000 Black Bean Estimates Argentine black beans enjoyed high demand and prices last year due to Brazil s production shortfall and limited availably supply from China. For 2017, Argentina increased area under production and yields are expected to be 10 14% higher than last year. South from Guemes, where 70% of Argentina s black beans are grown, good to very good quality is expected amid favorable weather conditions. Some crops near the mountains were hit by white mold, which may lead to quality problems for 8 10% of total production. In early June, prices had increased by 50% compared to the month earlier, ($750/MT grower, $900 FOB Brazil border) compared to May due to the weather problems in Southern Brazil, but were headed lower at the end of June as the prospect of a good Argentine harvest hit the market. During our June visit, we were told there are few, if any, exportable black beans remaining. 23 P age

Year Planted Area Production Exportable Supply Exports Jul 16 Apr 17 2016 180,000 217,800 158,460 144,851 2017p 189,000 246,000 179,000 Cranberry Bean Estimates Argentina s 2016 cranberry beans were sold out prior to planting mainly shipped to Brazil, which had a large dry bean deficit. We expect higher acreage and production for cranberry beans. However, there will be quality losses due to the susceptibility of cranberry beans to white mold. Year Planted Area Production Exportable Supply Exports Jul 16 Apr 17 2016 18,000 17,550 15,500 15,405 2017p 21,500 21,930 15,570 Red Kidney Bean Estimates Dark red kidney beans enjoyed good sales to Brazil in 2016. In contrast, demand for light red kidney beans which are primarily exported to Venezuela, the UAE and Pakistan has been soft. We expect similar acreage for red kidney beans with some switching from lights to darks. In terms of yields and quality, despite losses due to white mold, we estimate above average yields and average quality. Light Red Kidney Beans Year Planted Area Production Exportable Supply Exports Jul 16 Apr 17 2016 14,000 12,320 11,997 10,050 2017p 11,800 12,036 10,372 Dark Red Kidney Beans Year Planted Area Production Exportable Supply Exports Jul 16 Apr 17 2016 15,000 13,500 17,200 17,007 2017p 18,000 18,180 13,646 24 P age

4. Visits and Notes 1) Desdelsur, S.A. Von Wernicke 3041 B1642 GKA San Isidro Buenos Aires, Argentina Tel: +(5411) 4700 0102 www.desdelsur.com Marcelo Soto Acebal Commercial Manager Cel: +(54911) 4415 8843 msotoacebal@desdelsur.com Matias Marcera Senior Trader msotoacebal@desdelsur.com Desdelsur is an integrated production, processing and marketing company for a variety of specialty crops. The company owns 56,000 ha. of land, of which 28,000 ha. are in production and the rest is a forest reserve. 20,000 ha. are used for dry beans and they also buy beans from other farmers, about 35,000 MT. They grow 7,000 ha. of chickpeas (80%) and safflower (20%) and lease fields in other regions of the country that are allotted to a variety of crops, such as chickpeas, green peas and popcorn. They have a pulse processing plant and peanut processing plant in Salta province, are involved in an integrated livestock operon (50,000 head annual sales) and have a plant 95 kilometers from Buenos Aires that is mainly used for chickpeas. At the time of our visit, their warehouses were out of dry bean inventory. They annually process 21,000 MT of chickpeas, 16,000 MT is their own production. An expanding business is selling blanched peanuts with 100% traceability to European markets. Before the 2013 drought that wiped out much of the dry bean crop, they grew cranberry, dark red kidney and light red kidney beans, about 15,000 ha. The seed could not be saved for the new 2014 crop and the dark red kidney seeds did not produce beans that were fit for canning, so they stopped production. After the drought, Desdelsur was able to import some of cranberry beans they had sold to Spain to use as seed. It produces a round bean that is favored by Turkey. Light speckled bean from China is the alternative for Turkey during drought years. In 2013, when the drought diminished the Argentine alubia crop, Egypt entered the market more strongly. They could offer lower prices to Algeria and other nearby markets and their production increased from 30,000 MT to 70 80,000 MT. If the price for alubias falls to $1,100, then production will fall. They thought this year would be an exceptionally good crop, but the rains dampened that expectation, although they still expect higher production compared to last year. The week we met, there had been black bean offers from Brazilians that were $100 more per MT than the week before. 2) WensTrade Sergio Raffaeli Cel: +(54911) 4053 1912 Sergio.raffaeli@wenstrade.com 25 P age

Previously with ConAgra and Food Way S.A., Sergio just started a new partnership with a farm operation that produces 20,000 30,000 MT of dry beans, 85% alubia and 15% black. From 1998 to 2004, the dry bean business changed. Farmers used to sell to traders that processed and exported, but now the model has shifted to integrated production, processing and exporting. Large farmers seek vertical integration. Government decisions since 2006 have favored this change. Argentine tax laws are one issue. Exporters are supposed to receive a tax reimbursement within 90 days of export, but typically it takes much longer and they do not receive the full amount. They also lose money on the foreign exchange transaction, carrying the risk for the farmer. 3) Olega Florida 681 Piso 11 C1005AAM Buenos Aires Argentina Tel: +(5411) 5077 8200 www.olega.com.ar Daniel Groisman, Head of Company Cel: +(54911) 6278 5417 dgroisman@olega.com.ar Olega was established in 1960. It is engaged in production, processing and export of dry beans and peanuts and trades in a variety of other products as well. In 2011, the company added dry bean production to its portfolio since the industry was changing to a vertically integrated model. Black beans are typically not handled by established companies. Nearly all of the producers sell their own crop; it is put on a truck to transport to Brazil. If it is a poor year for quality, then better processing is required, including an electronic eye, which is when Olega and other processors are needed. Yet, processing costs more than smaller farmers can afford: $50 for processing, $12 for the bag, etc. Other factors that work against the smaller producer are the difficulty and cost of production and the change in the exchange rate. Thus, the business is changing and the independent farmer is disappearing. This year, he estimates 200,000 blacks, 150,000 MT alubias and 70,000 80,000 MT colored beans will be produced. In addition to factors in export markets, dry bean production increases when soybean prices are low. 4) José María Lazara S.A. Reconquita 656, 10th floor B C1003ABN Buenos Aires República Argentina Tel: +(5411) 4312 8311/7971 www.lazara.com.ar Dr. José María Lazara, Head of Company jmlazara@infovia.com.ar lazara@lazara.com.ar Dr. Lazara started his food brokerage business 40 years ago and now deals in several different products, including dry beans, sunflower seeds, peanuts and corn. For dry beans he mainly brokers alubias and cranberries. He sees opportunity to expand into Mexico. Alubia beans are the main business for exporters, including Dr. Lazara. Colored beans, such as cranberries, are handled and traded in a manner similar to alubias, while black beans are sold to Brazil, which is not his business. Last year, all of the cranberry bean crop was sold to Brazil. It is clear that Brazil is having a problem with the second harvest. The question is if the 26 P age

problem is big enough that it will take Argentina's bean production. One of the biggest problem in Argentina is poor seed quality. He and others have met with the National Agricultural Technology Institute (INTA) to encourage development of new varieties. 5) Las Martinetas Agribusiness Garmendia 69 Of. 2 San Miguel de Tucuman T4000NEB Tucuman, Argentina www.lasmartinetas.com Eduardo Turbay CEO Gerente Tel: +54 381 4538030 Cel: +54 9381 67322821 eturbay@lasmartinestas.com We met with Eduardo at his warehouse and processing plant in the Metan area of Tucuman where black beans predominate. The warehouse was empty, except for a few one ton bags of alubias that were not able to get on the last transit to port. He attends the major international dry bean events and food shows and is active in promoting new seed varieties, particularly for the dark red kidney beans that were wiped out with the 2013 drought and current quality is under par for canning. The Argentine dark red kidney beans loses color in the canning process and he has some better varieties that he would like farmers to produce for the European market, but it is hard to introduce and have adherence to a new variety. Egypt came into the market as a supplier of white beans in 2013, when Argentina s crop suffered from severe drought damage and diminished yields. The company processes for its own alubia brand and for growers. For stained alubias, the wrinkled and damaged beans can be removed, but they cannot solve all of the quality issues. He cited a variety of quality issues, mainly due to old seed varieties and mixed bean varieties planted in a field. Black beans have a stronger color gene and sometimes alubias grown on a black bean field will produce black colored white beans. Some Brazilian companies, such as Camil and Stival, are particular about the size of their black beans, e.g., 4.5 mm or more, while others, such as Arbaza/Kicaldo, can buy all types of black beans and use them for different purposes. 4 mm is considered the regular, while 3 mm or less is not fit for packaging. 27 P age

L R: Roman Kutnowski (USDBC), Ellen Levinson (USDBC), Eduardo Turbay (Las Martinetas), Cindi Allen (USDBC, Grower) and Enrique Massara (Las Martinetas) at Las Martinetas warehouse and processing plant in Metan, Tucuman Province, in the heart of the dry bean growing area. Top above: Cindi Allen shows Eduardo Turbay (Las Martinetas) pictures from her Nebraska farm of dark red kidney beans and harvest. Below left are 2016 crop dark red kidney beans and on the right are new variety DRKBs that Mr. Turbay would like farmers to produce. 28 P age

6) Cremer y Asociados SA RN 34N Jujuy, Argentina Ignacio Turino, Trader L R: Marco Antonio Macina (farmer) and Ignacio Turino (trader) in front of Cremer s plant. The Cremer plant we visited was previously owned by ConAgra. It is now an Argentine company and part of Cremer, a German company with presence in 27+ countries that is engaged in commercialization of legumes, popcorn and biodiesel and its derivatives in the international market. While we did not discuss the details, they also have a financing affiliate, Intergarantias SGR, which is a registered Reciprocal Guarantee Company created to promote micro, small and medium enterprises. It facilitates deferred payments and pools production for economies of scale in sales negotiations. In this region the company is engaged in crop management, processing, transportation and trading of dry beans. They forward contract and also buy at harvest, handling about 20,000 MT a year, mostly white beans (Spain, Turkey and Algeria are main buyers) and 5,000 MT black beans (Venezuela and Cuba are main buyers). At the time of our visit we were told there were no cranberry bean stocks in the country and he doubted any alubias remained. They were waiting for the alubia harvest (90% of their business) since the last ones were shipped about a month ago. 29 P age

Farmers beans are weighed, cleaned, sized and sorted and then packed in 50 or 25kg. polypropylene bags. Most are alubias that are railed to the Buenos Aires port. This is the only plant in the growing area that is alongside a railroad, which has the capacity to take 40 cars a week to Buenos Aires, a 13 day trip. The company has 6,500 ha. in the area and 7,000 partners. 7) Doble A Acos Argentina Miguel de Cervantes 2240, Casa e Barrió Grand Bourg Salta 4400, Argentina Tel: +54 387 416 9160 Francisco Lemos General Manager info@dobleasa.com.ar Doble A is affiliated with Acos, a trading company, and has a partnership with Pedon, a large food manufacturer in Italy. Doble A has a dry bean processing plant in Salta and a partnership with Pedon for a plant in Ethiopia. Previously, the two companies also partnered in an Egyptian processing plant where small producers supplied alubias, but that is now closed. Doble A is talking to Mexican companies about dry bean partnerships. Certified, improved seeds are needed so the dry bean plants would stand better, produce more uniform beans and be more resistant to disease. If there were better DRKB varieties with good blanching characteristics, for example, they could be sold for canning. Doble A buys from 10 15 farmers with 1,000 3,000 ha. He processed 16,000 MT 2015 crop alubias and 10,000 MT 2016 crop alubias, but may scale back this year as he is experimenting with some new product ideas. The market has changed because larger farmers are now opening their own processing plants and exporting. Another challenge is buying beans in July and exporting over the next 9 months. 8) Farmer Meeting Home of Marco Antonio Macina General Guemes, Argentina marco_macina@yahoo.com This is a picture from Marco s yard, where we had the meeting with farmers, agronomists, traders and local government officials. 30 P age

Marco farms 1300 ha. and grows alubias. He recently started BCNAndina, an agricultural exporting company, and his father is one of several farmers in the area who help organize the producers. We had a luncheon and meeting with 45 growers, exporters, government officials, and other members of Argentine agribusiness sector. We reviewed the status of the crop, farming methods, changes in Argentina s dry bean farming and marketing, and some top issues for farmers, such as seed quality, organizing to support a robust certified seed industry and diversification. Above left and center, beans in Marco Macina s field and right, Marcos and Roman Kutnowski (USDBC) in another field. The above picture was taken with some of the attendees at the farmers meeting. 31 P age