January 20, 2009
Argentina may lose US$4.4 billion tax loss on drought
Argentina's government may face a US$4.4 billion loss in export tax revenues this year as the worst drought in years continues to wreak havoc on the country's soy, wheat and corn crops, an agriculture analyst said.
According to Pablo Adreani, an analyst with Agripac Consultores in Buenos Aires, Argentina is going to have its lowest soy production in at least five years at 80 million tonnes of grains and oilseeds, a reduction of 20 million tonnes from 2008.
Soy output will fall by 8 million tonnes, wheat will decline 9 million tonnes and corn will drop 5 million to 6 million tonnes in this year's harvest, Adreani said.
Lower export-tax revenues this year will be difficult for President Cristina Fernandez de Kirchner's administration to meet an estimated US$21 billion in debt obligations next year, according to a January 5 report by the Royal Bank of Scotland. Fernandez lowered export taxes on corn and wheat by five percentage points last year in an effort to help increase production.
Last week, the US Department of Agriculture reduced projections for Argentina's soy crop this year to 49.5 million tonnes from a January 12 estimate of 50.5 million tonnes. Adreani said production could fall to as little as 40 million tonnes if the drought continues.
The Buenos Aires Cereals Exchange said January 16 that the lack of rainfall "seriously threatens" crops in most of the country's agricultural regions. Some parts in the provinces of Entre Rios, Santa Fe, La Pampa and Cordoba may also face severe drought, the Agriculture Secretariat said last week.
Argentine corn planting will drop 26 percent for the coming harvest as the drought discourages growers from sowing the grain, the exchange said in a separate report last week. Planting will decline to 2.38 million hectares (5.88 million acres), from 3.2 million hectares in the past season, the exchange said. The exchange has reduced its outlook by 60,000 hectares from the previous week.
Adreani said the country had corn losses that are practically "irreversible".
Argentina's corn planting was 94 percent complete as of last week, up from 91 percent a week earlier, the secretariat said in a Jan. 16 report.
Adreani said international soy prices however don't reflect the severity of drought in Argentina and neighbouring Brazil.
International prices could easily rise between US$15 and US$20 per tonne and prices could reach to US$50 per tonne if there is no rain, he added.
