November 8, 2007

 

Argentina shuts new soy exports ahead of tax hike

 

 

Argentina has closed the soy, soymeal and soyoil export registry in anticipation of an increase in the export tax on grains, according to local press reports.

 

New crop export commitments had soared to unprecedented levels as fears of an imminent increase in the export tax spurred exporters to rush to declare new-crop soy export commitments to lock in a reference price and tax rate.

 

While the first fields of 2007/08 soy are just beginning to be planted, exporters have already declared commitments to ship over 70 percent of the new crop.

 

As of October 29, exporters had declared 2007/08 soy 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.

 

In January, the government raised the tax on soy exports by 4 percent to fund a subsidy program 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.

 

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

 

The closure follows news Tuesday that the government summoned farm groups for negotiations seen precluding the reopening of the wheat export registry and a possible increase in the export tax on grains.

 

The meetings follow a warning Friday from agricultural groups that only a few days remain before exporters begin to default on wheat export commitments.

 

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.

 

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.

 

In November 2006, the government froze the corn export registry in the face of soaring export declarations. In June, the Agriculture Secretariat announced the reopening of the corn export registry for 3 million tonnes, but the quota was filled within a week.

 

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.