March 13, 2008

 

Argentina increases biodiesel export tax; clarifies other grain tax

 

 

Argentina's export tax on biodiesel will rise from an effective rate of 2.5 percent to 20 percent in addition to a host of other tax increases on grains, according to the Official Bulletin Wednesday.

 

On Tuesday, Argentina's government announced a sweeping overhaul of the export tax structure on grains and derivative products.

 

A sliding scale was implemented with rates increasing as export values rise. The new taxes will be in place for four years, economy minister Martin Lousteau said.

 

The export tax on soy will rise to 46 percent from 35 percent based on the government's March 11 FOB reference price of US$538 per tonne.

 

Based on current prices, the export tax on corn will fall to 24 percent from 25 percent, the tax on wheat exports will fall to 27 percent from 28 percent while sunflower oil shipments will be taxed at 36 percent, according to local brokerage Roagro.

 

Soymeal exports will be taxed at three percentage points less than soy, while soy oil will be taxed four percentage points less than the beans. Wheat flour exports will be taxed at 10 percent less than wheat exports.

 

The heavier tax on soy is designed to stem the rampant expansion of soy cultivation at the expense of other crops.

 

Argentina exports virtually all the soy grown each season. Farmers grew 47.5 million tonnes of soy last season, well over the 14.6 million tonnes of wheat, 21.8 million tonnes of corn and 3.5 million tonnes of sunseed.

 

However, the high profitability of soy and the low production costs will still favor the crop, according to some observers.

 

Increased export taxes depress local grain prices since the local value is determined by subtracting the tax rate from export prices.