Introduction
This report is a general introduction to the topic of investments in farming in Uruguay, and, for this reason, a description of the conditions under which farming takes place is provided.
Prices and values correspond to July 2009 and are obviously subjected to seasonal and annual variations.
To a large extent, the economy of Uruguay is dependent on agricultural production and down-stream manufacturing industries. Together, these activities provide more than 50% of total export values.
General Features
Uruguay has a total area of 18.5 million hectares, 85% of which can be considered as productive. It is used predominantly for agriculture and livestock production.
Land use in Uruguay
Total productive area : 16,3 million hectares
| |
% |
| Native pastures |
80 |
| Improved pastures |
10 |
| Crops, Horticulture,Forestry |
10 |
Climatic conditions are quite uniform throughout the country, with an annual average of 85 days of rain and a volume of 1,100 to 1,300 mm. Average daily temperatures range from 12ºC in July to 24º C in January, with an average of 29 frosts per year. There are however great variations from year to year, and within any year, between seasons.
Despite the uniformity of climate throughout the country, the great diversity of soil types determines the types of native pastures, which differ in their annual and seasonal productive capacity, their botanical composition and their quality.
Most of the soils in Uruguay are poor in phosphorus, with variable contents of nitrogen, organic matter and calcium. This causes different types of vegetation but typically there is a predominance of perennial summer species, very few native legumes and a relatively abundant number of weeds.
The area under native and improved pastures are utilized for grazing sheep, beef cattle,dairy cattle and horses.
Livestock Numbers
Thousand heads at June 2009
| Sheep |
9.000 |
| Beef cattle |
11.000 |
| Dairy cattle |
800 |
| Horses |
450 |
| Pigs |
300 |
| Total number of farms - estimated: |
35,000 |
With the exception of dairy farms, most of the farms are mixed, running both sheep and beef cattle.
On a national basis, livestock numbers at June represent an average stocking rate of 0,80 livestock units per grazing ha. (1 livestock unit = 1 breeding cow = 5 breeding ewes) and
a sheep/cattle ratio = 1
Mixed farms differ in the type of beef cattle production undertaken (breeding, full cycle or fattening) and also in the relative importance of sheep production
(sheep/cattle ratio). Thus, there is a high number of possible combinations.
In different zones in the country, and mainly due to the characteristics of the soils and native pastures, there tend to be predominant production systems with some particular features.
2.1 - Production levels in livestock production systems
Basically, production levels in mixed farms are determined by the quality and quantity of fodder obtained from native pastures, which present a marked shortage of nutrients in winter and also, occasionally, in summer.
Under these circumstances and taking average figures for a mixed farm with a productivity index = 100 (the national average), per hectare production levels for beef, sheep, meat and wool are:
Production level per hectare for an average mixed farm dependent upon native pastures
| Beef meat |
44.0 kg/ha |
| Sheep meat |
10.3 kg/ha |
| Greasy wool |
5.4 kg/ha |
In actual terms, these levels of production vary greatly from one farm to another due to the different productivity of the native pastures and the specific characteristics of each production system.
2.2 Beef cattle
The production of beef meat is the main agricultural activity in the country, consuming nearly 70% of the grass produced. The most important beef breed is the Hereford (80% of the total stock) followed by the Aberdeen Angus. Crossbreeding is becoming more popular every year with the introduction of exotic breeds (for example, zebu) in some areas and greater popularity of the continental breeds such as Limousin.
Breeding
Breeding activity is generally performed in the less productive land in conjunction with the sheep production (see zones 2-3 and 4 in the map). These farms keep a stock of breeding cows and replacement heifers to produce calves that are normally sold at weaning in autumn (May-June) or at one year of age (yearlings) to other farms specialized in the fattening of animals. Marking percentages vary between 55 and 85% with a national average of 65%. However, these figures can be improved substantially under better management systems directed to the improvement of nutrition levels.
Optimum economic farm sizes for that type of enterprise (production of calves and sheep production) should be bigger than 1,500-2,000 hectares.
Fattening
These farms specialize in fattening calves or steers to slaughter weight. They are normally located in the best parts of the country (see zones 1 and 6). The fattening process is performed on highly productive native pastures, crops (oats and rye-grass) or cultivated pastures (white, red clover, lotus, fescue, phalaris).
Feed-lots occupy only a small proportion of fattening systems.
It is common for a certain proportion of the farms to become involved partially in cropping activities, in an integrated system called "livestock-cropping", where the cropping and pasture areas are rotated properly.
Fattening farms normally purchase weaning calves (at 140-170 kgs.). They are sold for slaughter at 1 ½ - 2 years of age with a live-weight of 430-460 kgs..
Minimum economic size for this type of production system should be 1,000 - 1,500 hectares.
Full-cycle
The production system known as "full-cycle" combines the breeding and fattening of animals in one farm. It requires a type of land intermediate between those dedicated to breeding and fattening.
A "full-cycle" enterprise can be organized in one farm (normally with a mixture of land of different productivity) or in different farms, with one specialized in breeding and the other in fattening.
The advantages of a scheme such as this consist of controlling the whole production chain and enjoying independence from variations in the value of calves and steers.
However, managing a "full-cycle" enterprise within one farm has some inconveniences related to the simultaneous management and feeding of a great number of beef categories.
The minimum economic size for a full-cycle farm should be greater than 1,500 -1,800 hectares.
2.3 Sheep production
Nearly all the livestock farms in Uruguay are mixed, grazing beef cattle and sheep altogether. This seems to be the only way of managing the native pastures in some areas.
The relationship between sheep and cattle numbers tends to increase in those areas with poorer soils, but sheep are also raised in good farming and cropping areas.
The main objective of the sheep production is the production of medium to fine wool with sheep meat becoming more important every time.
The present distribution of breeds shows a clear predominance of "dual purpose" breeds: Corriedale (60%), Polwarth (12%), Merino (20%).
Wool production / head varies between 3.5 and 4 kgs., and the reproductive performance ranging between 65 and 90%
Market prices for wool in Uruguay follow the international values. When investors want to place more emphasis in the production of sheep, farms of larger size (more than 2,000 hectares) and of lower value are usually chosen.
Increasingly, the production of fat lambs is becoming more popular, due to the current very high prices for lamb and mutton meat.
2.4 Cropping
Cropping occupies nearly 1 million hectares in the country and is obviously restricted to the best soils in the west and southern regions, where most of the farms combine cropping and livestock activities. It is common for artificial pastures to be sown mixed with wheat. This practice contributes to reduce costs and to increase total productivity.
Main crops, areas and average yields are:
| Crops |
Area (ha.) |
Kgs./ha. |
| Wheat |
480,000 |
3,000 |
| Rice |
170,000 |
6,000 |
| Barley |
130,000 |
2,500 |
| Corn |
90,000 |
4,500 |
| Sunflower |
60,000 |
1,800 |
| Sorghum |
70,000 |
4,000 |
| Oats |
40,000 |
1,200 |
| Soybean |
580,000 |
2,500 |
In all situations, use of fertilizers is essential, but, excepting for rice cropping, irrigation is not required.
There are good opportunities for the production of grass and legume seeds to be used in cultivated pastures.
2.5 Milk production
Dairy farming is the more intensive animal production system and takes place in the smaller farms on better soils and near to Montevideo and other main cities (Zone 6). Milk supply to Montevideo is in the hands of an important producers' cooperative (CONAPROLE). Other private enterprises have recently started their activities in this field. The price of the milk to the farmer is fixed by the CONAPROLE cooperative in conjunction with the Government.
Currently, there is a trend for export of dairy heifers to Brazil and Mexico. This is an ideal complementary business to the production of milk.
On good land and with the proper husbandry techniques, milk production per hectare attains levels of 1,800 to 3,500 litres.
It is important to overcome minimum economic sizes (200 - 300 hectares) to enjoy scale economies.
Dairy farms usually require higher fixed investment per hectare. However, if they are well managed, they yield higher profitability than other livestock enterprises.
The fact that milk prices to the producer are fixed 2 or 3 times per year, taking into account increases in production costs, allows a more rational planning of dairy farms. There is the additional financial advantage of routine monthly income.
In dairy farms of higher size, milk production is usually complemented with the fattening of cattle, the exporting of Holstein heifers and, for some, cropping.
2.6 Forestry
Uruguay is strategically located between Argentina and Brazil, in the middle of the MERCOSUR and constitutes the natural way out of wood produced in the region.
Uruguay has excellent natural qualities for the developement of exotic species of rapid growth (Eucaliptus and Pinus)
A special promotional program of this activity in the country started in 1988, when forestry was declared of "national interest".
Forestry Development Program
The objective of this program is aimed at developing forest activity in the country, taking into account the comparative advantages due to the agroclimatic conditions and soils characteristics.
This program is operating since 1990 when the country was divided into Regions of Forestry Priority according to the classification of soils specially suitable for forestry.
In total, there are 3.6 million has. of this type.
The Forestry Law (Nr. 15.939) established the legal basis for the regulation and promotion of the National Forestry Development Program. This law declares as of high priority "the creation of forest resources, the development of the forest industry and the forest activity in general" This law defined the following benefits:
Exemptions of all the taxes over land including property contribution.
Partial devolution of indirect taxes included in the cost of exported goods.
These benefits apply to those plantations meeting the following requirements:
They have to be located on soils of forestry priority.
Species planted must be one or more of the following: Eucaliptus grandis, E. Saligna, E globulus, ssp globulus, E globulus ssp maidelnii, Pinus elliottii, Pinus taeda, Pinus pinaster, Populus deltoides and hybrids 63/51, Salix alba var corulea and hybrids 131/125 and 131/27.
The forest project must be approved by the Forestry Direction of the Ministry of Agriculture and Fisheries.