SASKATOON — Michael Cordonnier did a double take after reading that Argentina’s export taxes are heading higher.
After all, newly elected president Javier Milei had campaigned on a platform that included slashing those very same taxes.
“He’s doing exactly the opposite of what he promised 10 minutes ago,” said the publisher of the Soybean and Corn Advisor weekly newsletter.
Shortly after winning the election, the new government unveiled plans to increase the export tax on soybean oil and meal to 33 percent from 31 percent. The move would put those products on a level playing field with soybean seed.
It also to 15 percent from 12 percent.
“All the crushers are very upset about this, and the farmers are as well,” said Cordonnier.
Crusher margins were largely based on the two percent differential between the oil and meal taxes and the seed taxes.
Cordonnier surmised that Milei quickly realized the country was in worse financial shape than he anticipated.
He needs cash for a US$913 million loan payment that was due to the International Monetary Fund Dec. 21.
Export taxes on agricultural commodities comprise 11 to 12 percent of the government’s annual revenues.
Milei said on the campaign trail that he would compensate for that lost revenue by cutting costs an equivalent amount.
Cordonnier highly doubts he will eliminate the export taxes completely.
“There’s just no way. It’s financial suicide,” he said.
However, he might take steps to reduce the taxes if the economy eventually stabilizes.
If that happens, there could be huge ramifications for global agriculture. Argentina is usually the world’s leading exporter of soybean oil and meal and is a major player in corn and wheat markets.
If the export taxes were reduced, farmers would ramp up production of all those commodities, especially soybeans.
The country is the world’s lowest cost producer of soybeans. It has fertile soil, good climate, limited fertilizer requirements and low transportation costs.
“They grow their soybeans within a stone’s throw of the port. It’s like right next door,” said Cordonnier.
The could have both direct and indirect consequence for Canadian growers.
It would mean increased competition in the oilseed sector.
However, Argentina’s pulse crop exports would likely contract under the newly elected government, according to a crop trader from that country.
Matias Macera, trading manager with Desdelsur, told the Global Pulse Confederation (GPC) that the best way for Milei to lift Argentina out of its financial crisis is through increased agricultural exports.
“Agriculture can be the new government’s most important ally,” he said in an article published on GPC’s website.
Macera estimates that the new government’s economic stabilization plan may take 18 to 24 months to work.
“If this program does stabilize the economy, we will start to see a reduction in export taxes on crops like soy, corn and wheat,” he told GPC.
“If that happens, more farmers will likely be seeding soy or corn instead of pulses.”
Pulse production has been on the rise in recent years because there are no export taxes on those crops.
In the process, Argentina has become a modest exporter of dry beans, chickpeas and peas.
Macera is forecasting that the country will export 100,000 tonnes of Alubia beans this year, which is about half of a normal program. He didn’t have an estimate for coloured beans.
He expects the country to ship out 80,000 tonnes of chickpeas, down from an earlier forecast of 100,000 tonnes.
And it will move 100,000 tonnes of peas to market, with 75 percent of that being greens and 25 percent yellows.
Cordonnier agrees with the assessment that pulse acres would likely contract.
“They would certainly suffer at the hands of soybeans, especially, and corn,” he said.
However, the potential seismic shift in Argentina’s soybean production could eventually turn the global market on its head.
In the meantime, the soybean market is far more concerned about what is happening in the Brazilian state of Mato Grosso.
“Early soybean yields are horrendous,” said Cordonnier.
“This could be the worst soybean crop in Mato Grosso in its history.”
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