Argentine Tax Threatens Soy Output

Argentine soybean farmers’ production plans for this year are already set, but according to the leader of one of the country’s largest agribusiness companies, they may start backing off on future production plans if the government doesn’t cut export taxes.

International prices “are now at the critical point,” Gustavo Grobocopatel, general manager of Los Gobo told Dow Jones News Service on Monday. Los Gobo is one of Argentina’s largest grain producers with some 80,000 hectares (more than 197,000 acres) under cultivation.

Grobocopatel said his and other farmers’ current projects for expanding soybean production were planned six months ago when prices were high. However, if prices don’t recover or the government doesn’t compensate producers for the price loss by cutting the so-called “retentions” tax on exports, new projects for future production will be abandoned, he said.

That means “you will start to see production fall in the next two or three years,” Grobocopatel told Dow Jones.

Soybean exports have been the key component in the record trade surpluses Argentina has registered since devaluing its currency in January of 2002.

However, since the 2002 economic crisis, Argentina has also levied taxes on sectors regarded as big beneficiaries of the devaluation, primarily those of agriculture and oil. In the case of soybeans, the tax is 23.5% of the nominal value of exporters’ sales.

Farmers have been highly critical of the export tax and the International Monetary Fund, has urged Argentina to reduce the tax and other so-called “distortive” taxes in favor of boosting income tax collections.

But Economy Minister Roberto Lavagna, who spoke at the same conference, indicated on Friday that the government had no immediate plans to reduce the export taxes. He said repealing the taxes would not be possible until income tax collections rose to a sufficiently high level to offset the loss of tax revenue.

Editors note: Richard Brock, The Corn and Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at www.brockreport.com.