January 12, 2007

 

Argentina raises duties on soy exports for all categories

 

 

The Argentine government has increased the duty it imposes on soybeans, soyoil and soymeal exports by four percentage points, Economy Minister Felisa Miceli said Thursday (Jan 11).

 

In a press conference, Miceli said the increase would apply to the "entire complex" of soy export categories.

 

She said the increase meant that soy itself would now carry an export duty of 27.5 percent while soybean oils would be taxed at a rate of 24 percent.

 

Miceli did not cite a reason for the increase in export duties, which have long been a source of contention between the farming sector and the government.

 

Export duties on agricultural products such as beef and milk have been used recently by the government to try to steer production back to the domestic market and contain inflation.

 

In the case of Argentina's booming soy industry, however, for which domestic demand is far smaller than foreign sales, the duties have been in place since 2002 and have functioned more as a revenue-raising tool than a feature of domestic pricing policy.

 

Meanwhile, Brazil's soy crushers had responded positively to the Argentine government's decision to raise soy export taxes. They expected higher costs to open doors for Brazil. Brazil has been losing out to Argentina for years when it comes to competition for the world's soymeal and soyoil markets.

 

"We're not getting calls today asking for prices on soymeal, but it will come. It's a competitive business and the difference of one to 10 cents closes a sales deal," said Thiago Simon, a soy trader at Sperafico Agroindustrial, a mid-sized exporter of soymeal and soyoil.

 

"I think in the months ahead you will see buyers switching from Argentina to Brazil," Simon said.

 

A trader from a US multinational soy exporter in Sao Paulo said the change is good for Brazil. There have been no export taxes on Brazilian soy goods since 1997, but soymeal and soyoil are faced with a roughly 12 percent interstate sales tax called the ICMS. The tax, which differs from state to state, has made exporting soybeans tax-free a much better deal than crushing soy to create the value-added export items soymeal and soyoil.

 

"Had Argentina just increased the export tax on soybeans and left soymeal and oil at 20 percent then we'd have a problem, but they raised it across the board and that is good for us," said the trader.

 

If Argentina just increased export taxes on soybeans, Argentina soy crushers would likely turn out more soymeal and soyoil and just export less soybeans.

 

All of the multinational soy crushers in Argentina also have operations in Brazil. Local trade groups say it is unclear yet whether Brazil will really benefit from the decision because of the ICMS tax and the fact that Argentine farmers will face the brunt of the cost increase.

 

That could mean less money for Argentine soy farmers, which could slow soy expansion in the country, a soy trade group said Thursday.