Argentina duty hike to slash 500,000 ha from planted area: BAGE

Argentina’s new export duty scheme for grains and oilseeds recently could cut planted areas for the 2020/21 crop cycle by over 500,000 ha, a recent study by the Buenos Aires Grain Exchange (BAGE) suggests.

On December 14, the country’s new left-wing government eliminated export duties of 4 pesos per US dollar, and replaced it with a 12% duty for corn, wheat, sorghum, sunseeds and barley.

For soybeans, the export duty was increased to 30%, with further hikes to 15% and 33% now heading through parliament for approval.

BAGE’s study explores three 2020/21 scenarios, comparing the likely planted area under the old scheme, the impact of the 30% and 12% arrangement for oilseeds and grains, and finally considers the impact of 33% and 15%, as currently stipulated in a draft bill sent by to Congress for approval.

With no change to the duties of previous president Mauricio Macri, the total planted area for grains and oilseeds would have likely reached 34.17 million ha, delivering overall production of 129 million mt, according to the BAGE scenario.

Taking into account the second and third scenarios, the overall planted area could decline by 520,000 ha and 815,000 ha versus the base scenario, with the cuts manifesting themselves in substantially lower production.

For the 12% grains and 30% oilseeds, BAGE forecasts overall production of 126.4 million mt, while increasing the duties by a further 3 percentage points, cuts the production forecast to 124 million mt.

With the new, higher export duties in place, soybean production could decline by 963,000 mt in 2020/21, while corn and wheat could fall by 1 million mt and 390,000 mt respectively, versus the base scenario.

“The increase in export duties occurs in the context of vulnerability for Argentine agricultural production, which faces an adverse climate scenario as well as adverse international prices,” the BAGE report notes, with the country again facing significant dry conditions.

BAGE also noted that with the new scheme, the profitability of soybean, wheat and corn is seriously compromised in regions away from the core agricultural zone, which mainly includes Buenos Aires, Santa Fe and Cordoba.

“In many agricultural regions across the country, relatively high yields should be achieved for wheat and corn in an unfavorable year from the climatic point of view, to cover the costs and achieve a positive profitability,” the report notes.