March 14, 2008

 

Argentina soy plunges on new tax; trade stalled in protest

 

 

Argentina grains were not traded at the Rosario Grain Exchange on Thursday amid a protest over a sharp tax increase on soy exports.

 

However, soy prices on Wednesday were down sharply on the week, as the increased tax was absorbed by the local market, said Rosario Grain Exchange analyst Lorena D'Angelo.

 

On Tuesday, the 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 was raised to 46 percent from 35 percent based on the government's March 11 FOB reference price of US$538 a tonne.

 

Based on current prices, the tax on wheat and corn exports decreased by about one percentage point. Increased export taxes depress domestic grain prices since the local value is determined by subtracting the tax rate from export prices.

 

Argentina's four leading farm groups launched a two-day farm strike Thursday to protest the new export tax scheme. The CRA, FAA, SRA and Coninagro said the strike may be extended if the government does not respond to their demands to scrap the scheme.

 

Spot soy sold for ARS850 (US$269.84) a tonne Wednesday, down 23 percent from ARS1100 (US$349) last Thursday.

 

May 2008 soy was last traded on March 11, when it closed at US$307 a tonne, down from US$330 last Thursday.

 

Local corn prices were boosted by strong demand from exporters and a delayed harvest, which was limiting supply, D¡¯Angelo said.

 

Spot corn was traded at ARS510 (US$162) a tonne on Wednesday, up from ARS502 (US$159) last Thursday.

 

April 2008 corn sold at US$162 a ton Wednesday, unchanged from last Thursday.