December 23, 2008
Argentina corn, wheat tax reduction begins 


Argentine President Cristina Fernandez said that the corn and wheat export taxes announced December 4 would go into effect today (December 23).

Tellingly, leaders of the country's top four farm groups weren't invited to the presidential residence where Fernandez announced a series of farm aid measures. Tension between the government and the farm groups remains high following a series of crippling farm strikes launched by the groups last year.

The measures were far from effective solutions to the problems faced by the farm sector, the vice president of the Agrarian Federation Ulises Forte told local news channel Todo Noticias immediately after the announcement.

The export taxes on wheat and corn will 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 tonnes of corn and wheat produced over a fixed benchmark, Fernandez said.

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

Fernandez also announced that the government will create five feedlots on state lands where 200,000 calves would be sent for fattening and export.

Currently, beef exporters have to declare their total production capacity and are then authorized to export 25 percent of that amount, the rest going to the domestic market. If a beef exporter isn't producing at capacity, then the amount authorised for export is reduced accordingly.

However, the new feedlots will produce 100,000 tonnes of beef per year, which will be free from the domestic set-aside requirement, Fernandez said.

Sharp gains in international beef prices over the past two years caused local prices to rise sharply, and the government began to periodically block or limit exports to ensure domestic supply.

Fernandez also announced that small and medium-scale farmers would receive a further export-tax reduction on the corn and wheat they grow.

The export tax on fresh fruit exports was also cut by 50 percent, but the president didn't specify what the current rate was.

A drought aid package was announced, with 230 million pesos (US$68 million) being set aside for payments to farmers affected by the dry weather.

Fernandez said that overtime benefits would be extended to rural workers who put in more than 48 hours per week.

In addition to the new measures, the government is working on a law to regulate crop rotation and is in price accord negotiations with agrochemical producers, Fernandez said.

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