October 31, 2007

 

Argentina soy export commitments soar on tax hike fears

 

 

Fears of an imminent increase in the export tax on grains is spurring exporters to rush to declare new-crop soybean export commitments to lock in a reference price and tax rate, according to analysts.

 

The government is studying increasing the export tax on grains, an Economy Ministry source confirmed Tuesday (October 30).

 

While the first fields of 2007/08 soybeans are just beginning to be planted, exporters have already declared commitments to ship the majority of the new crop.

 

As of October 29, exporters had declared 2007/08 soybean export commitments of 6.7 million tonnes, up from 2 million tonnes at the same time last year.

 

New-crop soymeal export commitments totalled 7.3 million tonnes, up from 1.3 million tonnes a year ago, while 2007/08 soyoil export declarations reached 1.5 million tonnes, up from 731,462 tonnes.

 

Exporters must make a sworn declaration to the government of an export sale before shipping the goods. A reference price for tax purposes and the applicable tax rate are locked in once the company declares a shipment.

 

The companies "have already declared new-crop soy export commitments for 70 percent of the amount expected to be available for export," said Roagro analyst Javier Cabanellas.

 

"These export sales are based on individual decisions by the companies," Alberto Rodriguez, the director of economic research at the Argentine Oil Industry Chamber, or CIARA, said recently.

 

Argentina is the third-largest soy exporter in the world following the US and Brazil. Argentina leads international soymeal and soyoil exports.

 

In January, the government raised the tax on soy exports by 4 percent to fund a subsidy programme for domestic grain users designed to rein in rising domestic food costs.

 

Soy exports are currently taxed at 27.5 percent, while soymeal and soyoil shipments are taxed at 24 percent.

In March, the government closed the registry for new wheat exports in the face of soaring export declarations.

 

Companies had declared 8.8 million tonnes of 2006-07 wheat export commitments. The US Department of Agriculture sees Argentina exporting 10 million tonnes of wheat from this season's crop.

 

With the 2007/08 wheat harvest beginning, the government is expected to reopen the export registry soon, but an increase in the export tax is expected to be implemented first, according to local press reports.

 

Local press reports had indicated that President Nestor Kirchner would raise the export tax to increase funding for the upcoming administration of his wife, president-elect Cristina Fernandez de Kirchner.

 

On Sunday, Fernandez de Kirchner won a landslide election victory and takes office in December.

 

Faced with soaring international grain prices, the government has been struggling this year to rein in sharp inflation in basic foods. The government has imposed export limits and bans, reached informal price agreements with supermarkets and began paying broad subsidies to domestic grain users such as feedlots, dairies and millers.