IFT talks to Sergio Casas and Juan Iturralde about the rapid growth of the Argentine popcorn industry and its position as the world's top exporter.

By Dario Bard

1 Flares 1 Flares ×

In 1989, Sergio Casas, then 24 years of age and the director of Cerealzaga, S.A., a subsidiary of the renowned Argentine agriculture company Alzaga Unzué, purchased two popping corn hybrids from Idaho-based Crookham: Iopop 12 and P608.

131006-popcorn-interview-inside-argentine-popcorn-an-interview-with-sergio-casas

Photo: Sergio Casas

“My first experience with popping corn was with these two hybrids,” recalls Casas. “We did trial plots on about 100 hectares in the town of 25 de Mayo in Buenos Aires Province, and also in Salta Province.”

This was during the nascent days of what would eventually become the world’s top popcorn export market. From those modest beginnings, Casas would go on to convince industry leader Weaver Popcorn to establish operations in Argentina, and then serve as president of Weaver Argentina during a nine year period that saw the country’s popcorn export volume surpass that of the U.S.

Today, together with his long-time partner, Juan Iturralde, Casas runs Snack Crops, S.A., one of Argentina’s leading popcorn companies, with a projected export volume of 32,000 to 37,000 MT for this coming campaign. Snack Crops places special emphasis on quality; it was the first popcorn exporter in Argentina to achieve ISO 22000 certification and this year became the first to attain BRC certification.

“We have the most modern plant in Argentina,” says Casas, “and we work with state-of-the-art technology.”

131006-popcorn-interview-inside-argentine-popcorn-an-interview-with-juan-iturralde

Photo: Juan Iturralde

IFT sat down with Casas and Iturralde to reminisce about the Argentine popcorn industry’s history and to discuss its current and future challenges.

IFT: How did you become involved in the popcorn business?

Casas: My professional career began with Alzaga Unzué, a well-known agricultural company here in Argentina that I am very proud to have had the opportunity to work for. I was working for them and studying business administration at the Catholic University when the leadership decided to diversify the company’s exports. Cerealzaga was established as a subsidiary for this purpose and I was tapped to lead it from 1990 to 1992. I was given free rein to develop the products I thought would do best. Popcorn was one of the specialty crops we decided on because growing it is like growing corn, a crop Argentina has ample experience with, but with added value. Additionally, popcorn is a niche market that the world’s large grain companies aren’t involved in, so we wouldn’t have to compete with giants. Our objective back then was to export popcorn to the world’s second largest popcorn consumer: Brazil. Our first shipment there was to a company called Yoki, which just last year was acquired by General Mills.

After that first professional experience, I never stopped working with non-traditional crops. Toward the end of my tenure at Cerealzaga, I exported seedless grapes by air from Catamarca for TESCO supermarkets in the U.K. My whole career I focused on specialty crops because I understood that Argentina, beyond corn and oilseeds like soy and sunflower, has great potential and aptitude to develop value added products for niche markets.

IFT: Weaver Popcorn’s arrival in Argentina helped catapult the country’s popcorn industry to the position of top global exporter. How did that come about?

Casas: Just as Argentina’s popcorn industry was emerging, a few key developments were taking place. Mercosur was starting up, and so trade with Brazil was going to be much more fluid out of Argentina. At the time, Brazil was importing most of its popcorn from the U.S. I saw an opportunity and in May 1993, using my personal vacation time, I travelled to Van Buren, Indiana and met with Weaver Popcorn’s Export Manager and Field Production Manager. My message to them was that, if Weaver Popcorn intended to maintain its position as the popcorn industry’s world leader, it had to open operations in Argentina. My argument was that Argentina was next door to Brazil, the world’s second biggest popcorn market, and that thanks to Mercosur, Weaver could become much more competitive if it were to export popcorn out of Argentina.

They started operations down here in 1994. That’s when Argentina began to export popcorn in significant volumes. I served as president for Weaver Argentina from 1995 to 2004, and had the honor of receiving the EXPORTAR Foundation award on behalf of Weaver Argentina from the President of Argentina in December 2001. Eventually, I also served as the director of international sales, handling the sale of both Argentine and U.S. popcorn exports. That goes to show how important Argentina had become; a leading company like Weaver placed a significant share of the responsibility for international sales in its Argentine operations.

IFT: When you visited Weaver in 1993, did you imagine that Argentina would become the world’s top popcorn exporter?

Casas: Looking back on it now, it was rather insolent of me to tell a giant like Weaver what it had to do to maintain its leadership position. But to answer your question, when you dive into a project like that, you believe in it and you have a vision. I basically had a five-year horizon, and my sights were on Latin America. I thought maybe we’d get part of the European market. But I didn’t think much bigger than that. Thanks to the hard work that went into it, the favorable agricultural and economic conditions Argentina offers, the excellent farmers we have here, and the ability for people here to be innovative when opportunities present themselves, we achieved what we did, with the help, of course, of many exporters.

IFT: How did you start Snack Crops and what were the early years like?

Casas: In 2004, a few months after I left Weaver, I started Snack Crops with Juan Iturralde, the head of Baibe S.A., a farm company dedicated to producing specialty crops on 20,000 hectares, as well as another investment partner. I’d worked with Baibe since 1992. At one point, they grew popping corn on 7,000 hectares, which is a record amount for an individual producer; no one then or since has grown popping corn on that many hectares.

At Snack Crops, we started with confection sunflower and then added popcorn operations three month later when we opened a plant in 2005. Together, we have a long history working with popcorn. Juan has been growing popcorn in large volumes since 1992. And I personally have been involved in the industry since 1989. Together, we’ve been selling large volumes of popcorn for many years to more than 60 countries in Europe, Latin America, the Middle East, Africa, the Far East, and North, Central and South America. We also export to India, which is an important emerging market for us, and last year we were the first company to export Argentine popcorn to China.

Iturralde: When we started with Snack Crops, it was a smooth transition. We basically continued the excellent relationship we had with Sergio from before, except now we are partners instead of providers. Building on that relationship, at Snack Crops we look to establish long term relationships and loyalty with other producers. We have a profit sharing plan where every month our producers get a percentage of the FOB price of what we export. Additionally, we guarantee them a price floor per MT. In this way, we form a partnership that gives them several advantages; they get the security of a minimum payment and things can only improve for them from there.

Casas: The key for producers is to understand that specialty crops are niche markets. These products have a certain level of global demand and any production in excess will have a disproportionate effect on prices. Our producers know that we guarantee the purchase of their production and that they are producing for markets that we are supplying. That takes the risk out of it for the producer. We don’t ask them to plant first and then look for a buyer.

Iturralde: Our approach is exactly the opposite of that. We make this business as predictable as possible. Our approach to planting is intelligent and thought out so as not to produce too much and create a glut. We have demanding quality standards, so as to distinguish our product from that of other exporters. We are trying to create a specialty within a specialty. We aim to have the best quality product so that we can penetrate even the most discriminating and best-paying markets.

IFT: Tell me a bit about CAMPI (Chamber of Argentine Popcorn Exporters). How did it come about?

Casas: CAMPI was created to address the concerns of various exporters that were intimately involved with the popcorn industry around 2004 and 2005. Its goals are to promote, develop and incentivize the image of Argentine popcorn internationally. And here in Argentina, it promotes intelligent production, looking to meet the international demand in terms of quantity and quality.

IFT: What have been the biggest milestones you witnessed from the industry’s early days till now?

Casas: I’d say the first one was in 1989 when I brought the first Cretors volume tester to Argentina. I remember unloading it downtown, near the corner of Corrientes and Reconquista, where the offices of Alzaga Unzué were located. That tells you something about our focus on quality; even before we planted the first seed of popping corn, we had purchased a machine to measure the expansion ratio.

Then came my 1993 visit with Weaver, followed by the company establishing operations here and inaugurating its plant in Rojas, Province of Buenos Aires, in 1996. It was like the stars aligned for us, because the inauguration of that plant in May coincided with a terrible drought in the U.S. in July. That drought opened the door for Weaver Argentina, and also created a huge opportunity for other Argentine popcorn exporters to introduce Argentine popcorn to the world.

IFT: Let’s talk about some of the challenges the industry faces. Tell me a bit about what happened in the 2010 campaign and what can be done to prevent it from happening again.

Juan: That year, we had excessive production. It wasn’t done intelligently. Many producers tried to become exporters, but they didn’t have the know-how to do it. As a result, they caused prices to drop. And when prices started dropping, there was a rush by some to sell everything they had before the market dropped further. You have to have nerves of steel in this business, because on the demand side, you have very astute, very practical actors that, when they smell trouble, they are fast to take advantage of it.

Casas: The biggest challenge for all specialty crops is not logistical, nor is it price. It is about striking the right balance in terms of production. If production isn’t at the right level, you will see violent, disproportionate shifts in the supply and demand curves. If you have large volumes of production, you’ll see prices drop disproportionately. Inversely, if you have limited volume, you’ll see prices rise disproportionately. The key is for producers and international operators, including processors and exporters, to be clear about what markets they are going to supply, what are the needs of that market in terms of volume, and what a realistic projection of growth for that market might be. All specialty crops have a common factor: we should provide what the market needs; all excess production results in lower prices or in increased carryover.

What is the most difficult aspect of the specialty crops business? It’s the administration, among all the players, buyers and sellers at the international level, of a volume of production that is reasonable and that maintains a reasonable relationship between price and volume. Why? Because there is no hedging here. It is very difficult. No doubt this is a tremendous challenge. Every company needs to position itself and analyze the situation each and every year. No two years are the same, and this is especially true when it comes to specialty crops.

IFT: Could there be another 2010, or was it possible to implement preventive measures?

Casas: What CAMPI has done is promote intelligent production. It is the responsibility of all players, new exporters as well as seasoned exporters, to produce in accordance with the demand each one reasonably believes he will have for the coming campaign. Any excess production could result in another 2010.

Iturralde: We are talking about excessive surplus, not 10,000 MT more or less. In 2010, there was between 50,000 and 100,000 MT in excess of demand.

IFT: CAMPI, then, can’t do much more than raise awareness.

Casas: That’s right. No one can. CAMPI encourages all players to produce intelligently and responsibly, avoiding excessive production.

IFT: I understand there are popping corn hybrids being developed in Argentina. Can you tell me about them? What yields and expansion ratios are being achieved?

Casas: There are two large seed companies in Argentina today. There’s Semillas Basso, the market leaders, and then there’s Satus Ager. Most of the seeds from these companies are used here in Argentina. This year we’ve had a significant lack of seed, so I think it is all going to stay in Argentina. In fact, today Juan was talking to our seed provider, Basso, because we are short of seed due to severe popping corn seed production problems that affected the whole country, not just Basso. As a result, we expect that this year the planting area will be significantly reduced from earlier estimates because there simply isn’t enough seed, and consequently less Argentine popping corn seed will be exported. For instance, Argentine seed is usually sold in Brazil, but just last week a business contact there called me to inquire if we had any seed to spare. I’ve never received a call like that before. To me, that means Argentine seed isn’t being sold abroad this year.

Juan: In terms of yields, we are getting 50% to 60% above what a first-rate commercial common corn hybrid would get under the same conditions. And in terms of expansion ratio, you are looking at between 40 and 46.

IFT: Considering the seed shortage, what is the outlook for the coming campaign?

Casas: It’s too early to tell what production might look like this campaign. You have to wait until planting takes place. What we do know is there is not enough seed to meet the demand we are expecting. More importantly, I think, is that Argentina won’t be exporting as much seed as usual to markets like Brazil. This will result in less hectares planted there and, undoubtedly, unmet Brazilian demand.

Juan: We are in the early phases of planting. There is a first planting that is done in late September to mid-October. We are also seeing planting delays due to the lack of rain and the consequent dry conditions. And we know that when planting is late, yields are adversely affected. That’s another factor to keep in mind in terms of overall production. Then, after mid-October, we have a second planting that runs through late November; production for this second planting is less than in the first planting. So, it is far too early to tell what Argentina’s popcorn production will be this campaign.

IFT: What could this mean for prices?

Casas: We estimate that Argentine popping corn prices will remain, as they have historically, between 5% and 10% less than U.S. popping corn prices.

IFT: What do you see for the future of the popping corn industry?

Casas: In general for specialty crops, and for popping corn in particular, I see the market becoming more technical and professional, with more control, certifications, and greater oversight of the process. I see a closer relationship with our clients, who are closer to the final consumer, so that we have feedback on the nutritional value and quality of our products. I don’t see much of a future for the cottage industry segment in the next five to ten years. Everything is going to depend more on processes, controls, procedures and analyses. I see a greater emphasis on quality, and I don’t mean the expansion rate. We’ll have to convince consumers that there is intrinsic quality that we are also assuring.

Juan: I would add, from the production point of view, that Argentina undoubtedly has good natural conditions and a very professional and technical agriculture sector that is very efficient and capable of overcoming challenges. The trick will be to harness all that to meet international standards and norms. We have the production side down, and I see us growing professionally and continuing to improve the quality of our products.

IFT: What message do you have for readers of International Food Trader Magazine?

Casas: Argentina is an important international player in the agriculture industry, and it has a particularity that is simultaneously an advantage and a challenge: the country has 40 million inhabitants and is the size of India. Its internal market is very small, and that leaves us no choice but to go out into the world and sell ourselves internationally in order to grow as a country. Therefore, while other markets supply foreign markets with their surplus, in Argentina, with a wide-range of products, including peanuts, beans, honey and popcorn, practically 100% of that production is for export. As a result, we need to be flexible and open to the needs of the world, and, without an internal market to serve as a Plan B, there are plenty of reliable professionals here with whom international buyers can form a lasting relationship.

Juan: If you attend one of the specialty crop trade fairs, like Anuga or Gulfoods, you owe it to yourself to drop by the Argentina pavilion.