April 21, 2008

 

Argentina relaxes beef exports, soy tax issue unresolved

 

Argentina's farmers and the government came to a tentative agreement late Thursday to regulate beef exports and domestic supply but the soy tax issue is left unresolved.

 

The government agreed to reopen exports and raise the yearly quota to 550,000 tonnes, up from 480,000 tonnes. Exports of heat-processed meat from low-grade beef will also be freed. In return, farmers agreed to provide enough supply to the domestic market to bring prices of 13 locally popular cuts below the levels set by the government last month.

 

The agreement marks the first breakthrough in tense talks to avoid a repeat of a crippling farm strike that dragged on for three weeks last month.

 

However, the government and farmers failed to reach an agreement over wheat, and farmers continue to demand a reversal of a recent tax hike on soy exports.

 

"Let this be clear, the beef issue might be resolved, but there is little time and a lot remaining. Wheat and the export tax have to be the next discussion," the president of the Agrarian Federation, Eduardo Buzzi, told reporters.

 

In addition, there was some skepticism regarding the government's promise to open beef exports. In January, the government said that it would free up an additional two million tonnes of wheat for export, but has repeatedly pushed back the date that those sales can be made. On Friday, the date for resuming wheat exports was delayed again to May 5. Previous attempts to enforce caps on retail beef prices have failed.

 

The government has virtually shut down the export of beef, wheat and corn while the negotiations continue, using procedural red tape to deny export permits.

 

While the national leaders of the four top farm groups continue to meet with the government, farmers are growing restless and some local units are calling for a resumption of the strike.

 

Farmers launched their nationwide strike last month to protest higher export taxes on soy, the country's principal crop.

 

They have been demanding a reversal of the sliding-scale tax on grain imports, which initially pushed the tax on soybean exports up more than 10 percent from the prior 35 percent rate. The government has stood firm, saying that the tax is needed to generate revenue and to cut back on soy production at the expense of other crops consumed domestically in Argentina.

 

About 95 percent of the soy grown in Argentina each year are exported as beans, meal and oil. Soy make up about half of all grain produced each year, and high soy prices have prompted farmers to shift to the crop at the expense of wheat, corn, beef and dairy production.

 

However, farmers assert that the government's move was simply a revenue grab and that the timing of the tax hike - just days before widespread soy harvesting commenced - couldn't have been worse.