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October 25, 2016

Export Tax Plan in Argentina could Result in Slow Farmer Selling

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

While the 5% reduction in soybean export taxes for soybeans grown in northern Argentina may not have a significant impact on soybean acreage, the other part of the plan could have a big impact on farmer selling next year. The other part that I am referring to covers approximately 95% of the soybeans produced in Argentina. Starting in January of 2018, the nationwide soybean export tax will be reduced by 0.5% per month for 2018 and 2019. By December of 2019, the soybean export tax in Argentina will be down to 18%. I feel this new export tax program will be an incentive for farmers in Argentina to hold their soybeans off the market similar to what they did in 2015 when they were waiting for the outcome of the presidential elections.

After farmers in Argentina harvest their soybeans next March and April, I think many farmers will store some of their soybeans in those popular white silo bags with the intention of selling the soybeans after the tax starts to decline. Farmers will sell most of their soybean crop of course because they need to pay bills and invest in the next crop, but I think there will be a portion of the crop held back due to the new tax structure.

If the soybeans are dry when they are put into the silo bags, the condition of the soybeans remains good for at least two years. By holding onto the soybeans for a year or two, there could be a significant increase in price simply due to the declining export tax. Additionally, in a year or two, the commodity price cycle might start to move higher again. Regardless of the international price for soybeans, farmers in Argentina will know for certain that they will receive more for their soybeans the longer they wait to sell and I think that is exactly what they will do.