January 15, 2007

Brazil companies happy with Argentina's soy export tax hike

Brazil soy crushers responded positively to the Argentine government's decision to increase export taxes on soybeans, soyoil and soymeal by 4 percent over already existing taxes.

The Argentine government recently raised soybean export taxes to 27.5 percent and soymeal and soyoil to 24 percent. Most of the cost increase would come from cuts in prices that Argentine soy crushers offer soy farmers.

Brazil soy crushers however, said they expected higher costs to open doors for Brazil. Brazil has been losing out to Argentina for years when it comes to competition for the world's soymeal and soyoil markets.

More buyers would switch from Argentina to Brazil, said a soy trader.

A trader from a US multinational soy exporter in Sao Paulo held a similar view. There have been no export taxes on Brazilian soy goods since 1997, but soymeal and soyoil are faced with a roughly 12 percent interstate sales tax called the ICMS. The tax, which differs from state to state, has made exporting soybeans tax-free a much better deal than crushing soy to create the value-added export items soymeal and soyoil, he said.

If Argentina just increased export taxes on soybeans, Argentina soy crushers would likely turn out more soymeal and soyoil and just export less soybeans.

All multinational soy crushers in Argentina also have operations in Brazil. Local trade groups said it was unclear yet whether Brazil would benefit from the decision because of the ICMS tax and the fact that Argentine farmers would face the brunt of the cost increase.

That could mean less money for Argentine soy farmers, which could slow soy expansion in the country, a soy trade group said.

Brazil is the no. 2 soy producer behind the US, and Argentina is no. 3.