Vietnam exposed as Argentina’s export tax plight stokes supply fears

Amid expectations that Argentina’s incoming president, Alberto Fernandez, will have little choice but to increase the country’s export duties, corn, wheat and soybean meal importers in Vietnam fear they are particularly exposed to any change in taxes.

The destination has emerged as Argentina’s biggest customer for corn, with imports in 2019 already standing at 5.1 million mt – surpassing the entirety of 2018 by 600,000 mt as of August, according to government data.

And shipping line ups suggest September and October will likely add another 2 million mt to that total, catapulting Vietnam into the top five corn importers globally and cementing its place as Argentina’s top customer.

Wheat imports are less stratospheric, amounting to around 112,000 mt over the year to date, but the country has a key relationship in its soymeal imports, where 2.9 million mt has already been imported this year.

“Vietnam relies on more than 90% of its soybean meal source from Argentina,” one market source said, with Argentina the biggest meal exporter globally.

“It would impact us with higher prices if a new export tax is applied,” the source said.

“US soybean meal is too expensive and there isn’t enough. Vietnam’s crushing plants cannot provide enough for the country’s demand… I have not seen any other better source than Argentina,” a second source said.

For corn, any hike in export duties could see Vietnam’s supply swing towards Brazil – despite a surge in US corn imports in recent years, the preference remains for South American corn.

“We have tried with US corn, but besides the price it is the quality and colour. Vietnam likes South American corn more than US,” the second source said.

The election of Fernandez’s Frente de Todos coalition party in the October 27 election amounted to a crushing rejection of incumbent President Mauricio Macri’s austerity policies, after four years spent grappling with Argentina’s parlous economic state.

However, the new government will have limited fiscal wiggle room, with many seeing an increase to export taxes as a quick way to boost revenues, despite the potential impact on Argentina’s export prowess.

Currently, Argentina line up data shows 678,370 mt of Argentinian produce is expected to load from the country’s ports in the next two weeks bound for Vietnam, 334,870 mt of corn, 298,500 mt of meal and 45,000 mt of soybeans.

While Vietnam has been battling an African swine fever outbreak that has decimated its pig herd, demand from the poultry and aquaculture sector has remained strong, taking Vietnam’s corn imports in recent months to new records.

However, margins across the country’s feed making sector remain stretched with any increase in input costs likely to heap further problems on the beleaguered industry.