July 6, 2010

Argentine soy tax regime burdens US soy industry

Argentina's higher tax rating for its exported soy than soy meal, oil and biodiesel intended for foreign markets costs the US soy industry up to US$500 million annually, United Soybean Board (USB) study shows.

An independent economic and business consultancy serving agriculture, LMC International, conducted the study for USB's Global Opportunities (GO) programme, which works to improve market access for US soy, and examine unfair trade practices.

"Our examination of this complex issue shows what results is an unfair subsidy in Argentina for processed soy products. The difference in those tax rates has distorted the international soy marketplace," says USB Vice Chairman Marc Curtis, who also serves as the chair of the GO Committee.

The lower tax burden on Argentine soy meal, oil and biodiesel created a strong economic incentive for soy processing in Argentina. The country then exported these value-added products rather than whole soy.

Figures from the study showed Argentina exports 99% of its soy meal and 93% of its soyoil in an average year. It concluded that if the different tax schemes never existed, the US would have invested more heavily in soy crushing capacity with an eye on export markets, which would have boosted US soy prices.

"This study shows that the United States experienced a larger decline in its share of the soy meal and soyoil export markets, in part due to the export tax structure in Argentina," says Tom Hammer, president of the National Oilseeds Processors Association (NOPA), the US organisation representing 15 different oilseed processing companies in the United States.

"Brazil eliminated its differential export taxes in the mid-1990s and its share of value-added soy meal and oil exports declined fairly dramatically while its exports of unprocessed soy increased," he added.

Hammer noted that Argentina had kept its export tax regime since the early 1980's. He believed it was time for US soy farmers and the entire US soy industry to point out Argentina's distortion of global soy markets and its detriment to the US soy processing industry.

"If Argentina wants to tax its soy exports, it needs to do so at the same rates. The higher soy crushing margins that would emerge in the United States would result in additional soy crushing here. That would result in more profit potential for US soy farmers and the entire US soy industry," says Hammer.