April 7, 2009

               
Argentina scrapped tax breaks on soy imports on Monday (Apr 6) to promote the use of Argentine beans in crushing plants, but industry analysts say the measure could aggravate tight supplies.

Argentina, the world's top supplier of soyoil and soymeal, is also one of the top exporters of unprocessed soy, but repeated strikes by farmers in the last year have led crushers to import beans to keep plants operating at full capacity.

The measure is seen as a government effort to pressure Argentine farmers to sell millions of tonnes of old harvest beans they have been hoarding in anticipation of better prices.

Analyst Enrique Erize explained that the government is trying to take a chunk of crushers' supplies to force them to go out more aggressively in the local market to get people to sell soy.

Enrize said the step could worsen the impact of the drought-hit harvest on crushing activity by taking away another source of feedstock.

Farmers, already gathering 2008-09 soy, have been stashing 2007-08 beans in the hope of higher prices or a cut to the soy export taxes that have fuelled their year-long dispute with centre-left President Cristina Fernandez.

Rosario grains exchange recently estimated that farmers were hoarding some 5 million tonnes from the previous harvest, far more than they normally have left at this time of the year. Erize put the figure at about 4.5 million tonnes.

Paraguay, the world's fourth top soy supplier, exports between 1.5 million and 2.0 million tonnes to Argentina a year which is still a relatively small quantity.

Argentina is expected to gather between 39 million and 43 million tonnes of 2008-09 soy, Paraguay's harvest is estimated at about 4 million tonnes.

Paraguayan oilseed exporters reacted cautiously, saying they wanted more details of the measure in order to assess its impact. Soy is the country's top export earner.

Argentina's year-long dispute over soy export taxes has seen increased use of Paraguayan soy by Argentine crushers, while some beans are also imported from Bolivia and southern Brazil.