By: Manuel Sanchez, U.S. Grains Council Manager of Global Trade
Argentine farmers are keeping a close eye on the upcoming runoff elections in their country, as the outcome will have a direct impact on their bottom lines this coming harvest. Both candidates – Mauricio Macri and Daniel Scioli – in the election have expressed interest in working on policies to improve Argentina’s agricultural competitiveness and to encourage farmers to boost production.
In the past few weeks, and especially after the presidential elections on Oct. 25, there has been a change of mood and expectations, with many players hoping that export limitations and export taxes on corn and wheat, which are currently at 20 and 23 percent respectively, will be eliminated by the candidate elected president in the Nov. 22 runoff.
This change in policy could have a significant impact, especially on the low – in some cases negative – returns facing Argentine farmers today. The U.S. grain industry would also see the ramifications, particularly with the strong U.S. dollar currently making U.S. corn more expensive than that of South American origin, including Brazil and Argentina.
The existing Registry of Export Operation (ROE) system, by which exports of corn and wheat are controlled, and export taxes are meant to delink high international prices from local food prices. However, by limiting exports and announcing export quotas without a given pattern, buyers for the domestic market and exporters do not compete for the product, making Argentine farmers’ prices artificially low.
Soybeans are also slated for reform by the runoff candidates. Currently soybeans are exempt from Argentina’s export curb, but they do carry a 35 percent export tax, which Marci said he wants to cut by 5 percent each year, and Scioli said he would reduce to 25 percent, according to DTN Progressive Farmer.
Currently Argentine farmers are sitting on large inventories of soybeans as they wait out a highly-anticipated currency devaluation. Any devaluation or policy change could open the floodgates on Argentina’s soybean inventories, which stem from a 2014/2015 production of 57 million metric tons (2.1 billion bushels), according the USDA’s World Agriculture Supply and Demand Estimates (WASDE) report.
Ultimately, how fast the newly-elected president will be able to implement changes in policy will determine how such changes could impact farmers’ decisions for the summer crop season. The 2015/2016 crop is already in the ground for winter crops, including wheat and barley.
The U.S. Grains Council (USGC) will continue monitoring the situation in Argentina for indications of how post-election policy changes impact both the local market and the global grain trade.