July 31, 2009

Argentine soy prices got another boost this week from rising international prices, while corn and wheat trade was muted in anticipation of a government reduction in the export tax on those two cereals.

 

Heavy buying by China pushed up international soy prices, which carried the local market higher, local brokerage Roagro said in a market note.

 

Spot soy were traded at between 955 Argentine pesos (US$250) and ARS990 a tonne at the Rosario Grain Exchange on Thursday, up from between ARS940 and ARS950 a week ago.

 

May 2010 soy futures traded at between US$225 and US$232 a tonne, up from US$220 and US$222 a week ago.

 

Traders avoided taking a position in corn and wheat ahead of an anticipated change in the export tax.

 

"With cereals there weren't changes, nor movement, but expectations ahead of the meeting between the government and farm groups tomorrow," Roagro said.

 

With key talks on Friday, the Argentine government is set to offer disgruntled farmers a steep reduction in the export taxes on wheat and corn, and increased subsidies for dairy and beef producers, local press reported Thursday.

 

But farmers want more and are pushing hard for a complete removal of corn and wheat export taxes, as well as a sharp reduction in the tax on soy shipments, though the government is unlikely to grant such costly concessions.

 

The government proposal would lower the export duty on wheat and corn to 10 percent from the current 20 percent and 23 percent, respectively, according to local daily La Nacion.

 

But cutting the 35 percent tax on soy exports isn't on the table, La Nacion reported, citing an unnamed government source involved in the negotiations.

 

Spot corn was traded at ARS410 a tonne, up from ARS400. Trade has been light in recent weeks as farmers hope for the higher prices agreed with the government.

 

On Thursday, the government's theoretical price that farmers should receive for spot corn was set at ARS465 a tonne. That theoretical free-alongside-ship price is the free-on-board price minus export taxes.

 

On June 16, Argentina's grain exporters reached a deal with the government to buy up to 3 million tonnes of 2009-10 corn and an additional 1 million tonnes of new crop wheat at a theoretical price set by the government. In exchange, the exporters were ensured export permits for the surplus wheat and corn from the 2009-10 crop.

 

The deal is designed to boost local corn prices, which have been trading at a discount due to a risk premium because of the government's intermittent closing of exports.

 

December wheat was traded at US$160 a tonne Thursday, up from US$145 a week ago.

 

Spot wheat was last traded at ARS654 on June 18. The government's theoretical FAS price on Thursday was ARS660 a tonne.