Aug. 30, 2018
The very early corn planting in northern Argentina is getting off to somewhat of a slow start due to dryer conditions in northern Cordoba province and the speculation in the market is how much total corn will be planted in Argentina in 2018/19.
Farmers in Argentina have been increasing their corn acreage for the last several years and the trend appears to be continuing for the 2018/19 crop as well. The Buenos Aires Grain Exchange is estimating that farmers in Argentina will increase their corn acreage by 400,000 hectares or 7.4% above last year to a total of 5.8 million hectares.
The main reason for the increase in corn acreage is tied to the elimination of the export tax on corn. When President Macri took office in late 2015, he eliminated the export tax on corn and wheat. Ever since then, farmers have taken advantage of the situation and have been increasing their corn acreage.
Currently, there is a 25.5% tax soybean exports and it will decline by 0.5% per month until at least the end of the year. The export tax on soybean meal and oil was three percent lower than on soybeans and the tax on both of those products was declining 0.5% per month as well, until last month.
In late July the government decreded that the export tax on soybean meal and soybean oil would remain at 23% until at least the end of the year. Therefore, by December 31st, the tax on all three products will be 23%. The soybean crushers are very upset about this decision because the 3% deferential in tax between soybeans and the products was their built-in margin. That margin will now disappear by the end of the year.
Farmers in Argentina are warry of the government's commitment to continue reducing the tax on soybeans after December. They fear that the government will suspended the monthly reduction on the soybean export tax in January citing the same rational they used to suspend the reduction of the tax on meal and oil - the government cannot forgo the revenue due to the stipulations in the $50 billion line of credit issued by the International Monetary Fund. Unfortunately, farmers must decide on their crop acreage way before the end of the year.
A somewhat slow start to the early planting is not that much of a concern. Corn planting in Argentina occurs in two phases. The most intense planting of the first phase occurs during the month of October, whereas the most intense planting of the second phase occurs during December.