Argentina’s soybean sales surge ahead of export duty hike

Argentina’s soybean sales doubled in the first 18 days of June from a year earlier to 4.71 million tonnes as farmers rushed to seal deals ahead of a planned hike in export duties on July 1, official data analyzed by Reuters and industry sources showed.

The government of Libertarian Javier Miley temporarily cut soybean taxes at the start of the year, with the cut set to expire in July. It will see the tax on soybeans rise to 33% from 26%, and on soybean oil and soybean meal to 31% from 24.5%.

The data, which is publicly available but has not been previously published, highlights how producers in the country, the world’s largest exporter of soybean oil and meal, are stepping up sales to secure the lower tax rate, which industry experts say could lead to an abrupt end to deals in July.

Argentina, also a major corn and wheat producer, relies on soybean export sales as the biggest source of much-needed foreign exchange for its ailing economy. It needs to rebuild dollar reserves under a $20 billion IMF program.

“Business activity, especially in the soybean sector, has picked up in recent weeks due to the (expected) expiration of the decree reducing tax withholdings,” said agricultural market analyst Lorena D’Angelo in Rosario, a major agricultural hub.

Ariel Tejera, senior market analyst at grain broker Grassi SA in Rosario, told Reuters that Argentina’s agricultural export companies had reported about $4 billion in grain and agribusiness sales abroad as of June 23.

Tejera added that the figure exceeded the average of $2.6 billion paid by agricultural export companies for the entire month of June over the past five years, explaining that the sharp increase was due to the upcoming tax hike.

Gustavo Idigoras, president of the grain and oilseeds export and processing chamber CIARA-CEC, confirmed to Reuters the increase in sales and foreign deals that companies such as Bunge and Cargill report to Argentine authorities.

SOYBEAN SALES MAY STOP IF TAXES HIGHER

However, Idigoras also warned that once the temporary tax break expires at the end of June, local producers will likely slow down their sales.

“With the increase in export duties to the initial rates, this sales flow is not expected to remain at the same level, so we may also see a decrease in sales abroad,” he said.

Tejera, of brokerage firm Grassi, explained that the higher tax rate would reduce by about $30 the price farmers receive for soybeans, which closed in Rosario on Wednesday at nearly $280 a ton, a historically low level.

At that price, “their profitability is at significant risk,” said Dante Romano, a researcher at the Center for Agribusiness at the Universidad Austral in Rosario.

The industry has resumed lobbying the market and business-friendly President Milea to extend the tax breaks. Government spokesman Manuel Adorni told reporters on Wednesday that “there is no decision on this yet.”

“This growth will result in nothing else being sold after that, which could be counterproductive,” analyst D’Angelo said.

Tags: soybean, Argentina