Smaller trader houses to suffer most from Argentine tax change

Argentina’s change in tax policy for exports of grains and oilseeds and their products will have limited impact on global prices, but will instead increase the marginal cost of trading positions forward for smaller trading houses, market sources said this week.

Last Thursday, the Agriculture Ministry issued a resolution that will limit the term time for the registration of spot exports from 45 days to 30 days, while simultaneously forcing exporters to pay the tax shortly after the date of sale and not on the date of shipment.

For products such as wheat, soybean, barley, corn, sorghum, sunflower, soyoil and soymeal, among others, export duties must be paid within five days of the registration for 90% of the declared shipment.

Meanwhile, the move to cut the term time to 30 days blocks an old loophole that allowed spot volume exporters to pay lower taxes based on prompter shipments, only to ship the goods later (after 30 days) for a higher value if the market was in carry.

For smaller trading houses that ship the bulk of their goods on the spot market, it will be more painful than for bigger trading houses, sources said.

“This change is not going to be a game changer. Most players won’t be influenced by this change apart from the few players that mainly play on the shorter term,” a Geneva-based soymeal trader said.

“The bulk of your crush, you ship through the long-term registration process,” he added.

“The changes on the export declarations resulted in incremental financial costs for deferred positions,” a Buenos Aires-based trader said, explaining that exporters would now have to pay taxes up front rather than on the day of shipment.

That means the only loss is the time value of money in today's low-interest  environment.

“It’s a financial issue. Having to prepay now, means you have to pay today’s exchange rate and you can’t take advantage of the carry,” a second Buenos Aires-based trader said.

“This makes the crush margin a bit lower due to higher export taxes.”

A bigger concern for Argentina is the lack of demand for goods, such as vegetable oils and meals, of which Argentina is the world's biggest exporter.

“There is a lack of demand so far... We have sellers, but we need buyers," said one Argentine broker of vegetable oils and meals.