August 1, 2008

 
Argentina studies new grain tax plan after setback

 

An Agriculture Secretariat spokesman declined to comment on the report.

 

The new Agriculture Secretariat, Carlos Cheppi, is considering a plan to raise the export tax on soy to 40 percent from the current 35 percent and lower the export tax on corn and wheat by five percentage points to 20 percent and 23 percent, respectively, Clarin reported.

 

With soy and corn planting set to kick off within the next two months, the new tax levels would appear designed to stimulate corn planting and reduce incentives to plant soy.

 

The government has made clear its desire to boost production of farm goods consumed locally, but soy have been steadily displacing other production over the past years. Almost all of the soy grown each year is exported.

 

Farmers planted a record 16.6 million hectares with soy last season, using about half of all cropland to grow the legume, according to the Agriculture Secretariat.

 

There are signs that farmers are again planning on greatly increasing soy planting at the expense of corn due to continued tensions with the government and a recent rollback of the higher export tax on soy.

 

Rosario Grain Exchange chief analyst Rogelio Ponton said that soy area is likely to increase sharply due to the lower risks and input costs associated with the crop.

 

Local brokerage Panagricola Vice President Ricardo Baccarin estimated that soy area will rise 5 percent from last season, while Agripac Consultores analyst Pablo Adreani sees increases of 6 percent.

 

Higher input costs to grow corn and sunflowers and uncertainty regarding government farm policy will spur farmers to plant even more of the sure-bet soy this season, said Rodolfo Rossi, the president of the Argentine soy chamber, known as ACSOJA.

 

The government has repeatedly stepped in to limit wheat, corn and beef exports to ensure domestic supply and rein in rising food prices.

 

The government's reversal of a March increase in the export tax scheme, which sharply raised the taxes on soy, is also going to favour more of the legume, according to analysts.

 

Soy export taxes were rolled back to a fixed 35 percent, down about 10 percentage points from the tax under the sliding-scale tax plan.

 

Farmers and the government had been locked in a bitter battle since March, when President Cristina Fernandez implemented the new sliding-scale grain export tax plan.

 

Farmers launched a series of crippling strikes and roadblocks that caused food shortages in the cities and stalled exports.

 

The lingering conflict forced Fernandez to seek Congressional endorsement of the tax plan. The House passed the tax, but the Senate delivered a stunning surprise earlier this month, rejecting the tax by one vote. Vice President Julio Cobos cast the deciding vote against Fernandez' tax plan.

 

The government reversed the taxes following the defeat in the Senate.