Argentina modifies soybean export tax to encourage forward sales

Argentina is to levy taxes on exports of soybean, soymeal and soyoil on the date of the shipment rather than the date of sale, the ministry of agriculture said Tuesday, a move that is meant to unlock forward sales of the goods.

Argentina, the world’s third biggest exporter of soybeans and the biggest exporter of soymeal and soyoil, is gradually reducing its steep export taxes at the rate of 0.5 percentage points per month from January 2018 through December 2019.

The application of the taxes on the date of sale, which were 30% for soybeans and 28% for meal and oil at the start of the year, have meant few sellers were willing to commit to exports of soybeans and products until later in the year to avoid paying higher taxes.

"This was much needed by the export sector, mainly soybeans, to unblock the forwards sales of soybeans, soymeal and soyoil," Luis Miguel Etchevehere, minister of agribusiness, said in a statement on the agriculture ministry website.

However, brokers said they were sceptical it would have that impact.

Pablo Pochettino, a broker with Intagro, told Agricensus: "This measure alone does not mean more sales in the future," adding incremental reduction of duties and good prices for corn and wheat mean that producers will seek to hold on to beans.

"I think that it doesn't necessarily imply an increase in forward sales," said Eugenio Irazuegui, an analyst with brokerage Zeni.

"Before the change, exporters were discouraged from declaring sales, because they paid a higher tax rate. Now, sales declarations of exporters should begin to have a "normal" behavior," he said.

Struggling

The modification of the tax system comes as Argentina is struggling with a poor harvest, with this year’s crop expected to be 40 million mt or lower, down 30% on last year’s on poor weather.

The tax reduction is part of President Mauricio Macri’s plan to boost production in, and exports from, the nation’s massive agriculture sector.

The policy, which was outlined in 2016, is expected to cost the nation’s treasury about ARS 15 billion ($815m), according to a 2017 report by the Rosario Stock Exchange.

Yet the government is hopeful that cutting export taxes on soybeans will boost production, much the same way that eliminating taxes on corn and wheat exports in 2015 encouraged farmers to plant 50% more grain over the last three years.