September 14, 2009

Argentina corn planting is likely to get a significant boost following the lifting of export taxes for small-scale growers, but is still seen down for the season.

 

On Thursday (September 10), President Cristina Fernandez announced the elimination of the export tax on wheat and corn for small and medium-scale growers, in a move designed to mollify disgruntled farmers and stimulate increased corn planting.

 

Wheat exports are currently taxed at 28 percent, while corn exports are taxed at 25 percent. Soy exports carry the highest export duty of 35 percent.

 

Wheat planting is complete, so it's too late for an increase in production, but time still remains to build up the corn area. Under 5 percent of the corn crop has been seeded to date.

 

If the programme is effectively implemented, it could increase the corn area by 300,000 hectares, said AgriPac Consultores analyst Pablo Adreani.

 

Before the tax relief, Adreani expected a 23 percent drop in corn area for the year, but revised that to an 11 percent drop following the change. Adreani now sees 2009-2010 commercial corn production at 17.9 million tonnes, up from 15.5 million tonnes seen before the tax change and 14 million tonnes last season.

 

Eduardo Sierra, chief climatologist at the Buenos Aires Cereals Exchange, agreed that the tax relief would likely boost the planted area to around 2 million hectares, compared to the exchange's current forecast of 1.875 million hectares of corn.

 

The government has pegged domestic consumption of corn from the 2009-2010 crop at 8 million tonnes, leaving an equal amount available for export, according to the Rosario exchange.

 

However, analysts point out that the optimal period for planting corn has passed, which may limit the gains. The government's plan is also short on details, which may make farmers hesitant to gamble on actually collecting the tax rebates and planting corn.

 

In addition, many of the small-scale farmers whom the tax break targets are operating in the black, or have tax debts which may make it difficult for them to collect, Adreani said.

 

Still, the president is optimistic that the move will heighten the production of corn, which is widely used locally in cattle feedlots, pork, poultry and dairy production.

 

Fernandez said that the tax breaks would see half of the export tax from corn and wheat returned to farmers.

 

One percent of all wheat growers produce half of all output and 5 percent of all corn farmers grow half of that crop, the president said. This means that the majority of the country's farmers will see benefits from the lifting of export taxes on those crops, she said.

 

Argentina's 2009-2010 wheat planting is estimated at 2.8 million hectares, according to the Buenos Aires Exchange. That marks a 40.5 percent drop in area from last season and is the lowest area on record.

 

The Buenos Aires exchange hasn't forecast production yet, but the Rosario Grain Exchange says that 2009-2010 wheat production is likely to total about 7.4 million tonnes.

 

That's down from 8.7 million tonnes in 2008-2009, and down sharply from the average of 14.76 million tonnes over the previous five years.

 

With domestic demand pegged at 6.5 million tonnes by the government, just 900,000 tonnes of wheat are likely to be left over for export from the 2009-2010 crop.

 

Meanwhile, soy production is expected to rise sharply again next season.

 

Soy planting is likely to surge to between 19 million and 20 million hectares during the 2009-2010 season, according to private analysts. That would shatter the record set during the 2008-2009 season, when farmers seeded 16.6 million hectares with the oilseed.

 

The Rosario exchange forecasts 2009-2010 soy planting of 18.5 million hectares, with production of 50 million tonnes.

 

In addition to weather factors, the fact that soy are the only major crop in which the government doesn't control exports is spurring farmers to plant more of the oilseed. Argentina limits the export of wheat and corn to ensure domestic supply and keep down local prices.