Argentina’s cut to soy export taxes, designed to revive the country’s exports, received a cool response, termed “isolated and insufficient” by farmers, with traders questioning its likely effectiveness too.
Argentina’s government overnight unveiled a reduction, for the rest of 2020, of 3 points to 30% in the export duty on soybeans - as well as the processing products soymeal and soyoil - in an effort to boost prices that farmers will receive for the oilseed, and encourage them to release crop onto the market.
The move, which may reportedly be followed by reductions to export levies on other crops too, as well as to duties on beef and metals, is aimed, in boosting trade, to “strengthen the country’s international reserves”, Martin Guzman, Argentina’s economy minister, said.
Growers have been hoarding crops as a hedge against weakness in Argentina’s peso, with soybeans a particularly popular choice given the large export tax, which undermines their returns.
‘Isolated and insufficient’
The move received a cautious welcome from the CIARA-CEC export companies’ chamber, which said that it was “on the right path of lowering the enormous tax burden that is on the soy chain”, and would lift producer prices.
However, the chamber added that the reduction was “not enough”, a theme echoed by the Sociedad Rural lobby group, which termed the reduction “isolated and insufficient”.
The temporary reduction in the duties, which will be put back up to 33% in January, “will not solve any situation”, the group said, added that farmers would not prove beneficiaries of the tax cuts.
Some observers have said that merchants, knowing that farmers could be more enthusiastic sellers in for the rest of 2020, may swallow much of the concession.
Lack of consultation
The move also represented only a “patch” for the country’s broader economic woes, which required a broader drive to repair, the Sociedad said, criticising too a lack of government consultation ahead of the tax cut.
In two meetings that the group had held with Alberto Fernández, Argentina’s president, one ahead of his election and the other just before taking office, “he maintained that his government would not take measures that affected the countryside without consulting” a liaison committee.
“This has not been the case” over the levy reduction, according to the Sociedad Rural.
Exports to Brazil?
On the grain markets, Karl Setzer at AgriVisor highlighted the untapped demand for Argentine soybeans, saying that not only do the country’s own crushers require crop to process, “but there are hopes for elevated exports to Brazil as well”.
Soybean supplies in neighbouring Brazil have been sapped by an enthusiastic export programme, spurred by a weak real.
Steve Freed at ADM Investor Services said that improved farmer selling was “unlikely with the peso losing value every day”, boosting the importance to producers of holding on to assets whose value is linked to the dollar.
‘Most reliable currency’
At Futures International, Terry Reilly, noting broader doubts over the plan’s efficacy, said that “either way you look at it, many Argentine producers consider soybeans to be the most reliable currency around”.
He added that producer selling “may end up heaviest on the back end (December) before the tax rate reverts back to 33%”.
The broker had heard that “Argentina producers are sitting on about 16m tonnes of soybeans”.
Official data show that soybean sales by Argentine growers are down 4.4m tonnes so far in 2019-20, at 32.2m tonnes of soybeans, although this was after a smaller harvest, which the farm ministry pegs at 49.0m tonnes, down 6.3m tonnes year on year.
The ministry sees the country’s carryout stocks of soybeans rising by more than 40% over 2019-20 to 6.65m tonnes, with the harvest reduction more than offset by cuts to expectations for exports and to the domestic crush.