December 10, 2008

Argentina isn't considering lowering the export tax on soy despite last week's move to lower the duties on corn and wheat shipments, Cabinet Chief Sergio Massa told a local daily newspaper in remarks published Tuesday (December 9).

Following speculation in the local press that the tax on soy would be lowered, Massa told La Nacion that such a move wasn't in the cards right now.

Local press reports had speculated the government was considering lowering the export tax on soy to spur farmers holding on to stocks to sell.

Argentina's farmers are sitting on extremely high soy stocks from the 2007-08 crop.

About 10 million tonnes of soy are resting in silos and in plastic bags across the farm belt, up from the 3 million tonnes usually remaining at this time of the year, Rosario Grain Exchange economist Lorena D' Angelo said recently. This year's stocks represent 22 percent of the record crop grown in 2007-08.

Farmers began holding back stocks in March when they launched a strike over grain export taxes. That conflict dragged on for four months before the government backed off the sliding-scale taxes following a Senate vote against the plan.

Even after the strike ended, farm group leaders urged their members to only sell the minimum necessary to get by, holding on to stocks in the hope of a rebound in prices. However, soy prices have fallen about 50 percent since the peaks hit in mid-2008, and farmers are hesitant to take their beans to market at current prices.

Argentine president Cristina Fernandez announced last week that the export taxes on wheat and corn would be lowered by five percentage points and will be reduced even further if farmers increase output. The move is designed to stimulate production of those crops, which are consumed domestically, rather than soy, which are almost exclusively exported.

Wheat exports will now be taxed at 23 percent, while corn shipments will carry a maximum 20 percent export tax.

Export taxes will be reduced an additional percentage point for each million tonne of corn and wheat produced over a fixed benchmark, Fernandez said.

The export tax on soy was left unchanged at 35 percent.

While farmers welcomed the president's announcement that the export taxes on corn and wheat would be lowered, they continue to complain government policies are stifling the sector.

Tensions between the government and farm sector still run high following the strikes and continued government intervention in the sector to limit exports and keep down domestic prices.