Oct 17, 2016

Soy Export Tax Reduction Barley Helps Farmers in N. Argentina

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Under President Macri's new soybean export tax regime, farmers in northern Argentina will get a 5% reduction in their soybean export tax from 30% to 25% this growing season in the form of a rebate, but soybean producers in the rest of the country will have to wait for a reduction in their soybean export tax. For most of the country, the plan is to lower the soybean export tax by 0.5% per month during 2018 and 2019. If he carries trough on his promise, the soybean export tax would then be 18% by the end of 2019.

Farmers in northern Argentina are happy to receive the help of course, but they say that it is barely enough to make a significant difference. According to the Northern Grain Producers Association (Prograno), under the old soybean export tax of 30%, farmers in the northern province of Salta would lose $12.70 per hectare ($5.14 per acre) based on historical costs and price trends. Under the new export tax plan, famers would make a profit of $38.00 per hectare ($15.38 per acre).

The above figures are for farmers who own their land. If farmers rent the land, the picture is not nearly as optimistic. If farmers rent the land to produce soybeans, even under the reduced export tax, they would lose $60 per hectare ($24.30 per acre). Prograno estimates that the soybean cost of production on rented land is $552 per hectare or $223 per acre.

With the 5% reduction in the soybean export tax, producers in Salta would save approximately US$ 23,400,000 based on estimated production of 1.17 million tons in the province.

Salta is one of the northern provinces of Argentina that has the capability of expanding grain production if commodity prices are high enough to generate a profit. It is more difficult to generate a profit growing grain in northern Argentina because their costs are generally higher than in central Argentina, the yields are generally lower, and their cost of transportation is much higher due to the greater distances to export facilities.

Many farmers in Argentina feel this half-hearted effort to reduce soybean export taxes will not change the overall acreage dynamics in Argentina in any significant manner. I continue to feel that corn has the advantage over soybeans and that the 2016/17 corn acreage in Argentina will increase approximately 25% while the soybean acreage declines approximately 3%. I view this limited action on reducing the soybean export tax as the government way of saying that they recognize the problem, but the economic reality of the country is forcing them to take a go-slow approach in addressing the problem.