Sean Pratt reports from the Oilseed & Grain Trade Summit in Minneapolis, Minn.
MINNEAPOLIS, Minn. — Wheat and corn exporters can expect increased competition from Argentina as farmers there adjust to the removal of punitive export taxes on most crops.
“The past government was kind of anti-farming and mainly was capturing all the value that the farmer was getting for high commodity prices,” said Jose Gobbee, director of GOAGRO.
It accomplished that through exorbitant export taxes of 20 to 35 percent on the major crops grown in the country.
Read Also
Critical growing season is ahead for soybeans
What the weather turns out to be in the United States is going to have a significant impact on Canadian producers’ prices
The first thing the new government did was completely eliminate those taxes for every crop except soybeans starting in 2016.
The soybean tax was immediately reduced to 30 percent from 35 percent when President Mauricio Macri took office in December 2015.
The plan was to decrease it by a further five percentage points per year starting in 2016 but implementation of that plan has been pushed back until 2018 because of budgetary constraints.
The result is that farmers in Argentina are planting a lot more corn and wheat at the expense of soybeans.
Corn acres are expected to be up a whopping 27 percent this year, the first significant increase in 10 years. Wheat acres are also forecast to soar by 19 percent. Soybean acres will fall 2.4 percent.
The elimination of the 20 percent export tax means farmers within a 400-kilometre radius of the Port of Rosario will make money growing corn for the first time in years.
“Farmers are getting a return on investment of 15 to 20 percent, so very profitable if you have good weather conditions this year,” Gobbee told delegates attending the 2016 Grain & Oilseed Trade Summit.
Areas that are more than 600 km from the port remain at below break-even profit levels because of high transportation costs.
He is forecasting 33 to 36 million tonnes of corn production, up from 29 million tonnes last year. Farmers will likely produce 12.5 million tonnes of wheat, up 21 percent over last year.
The planting season is starting nicely with excellent moisture conditions. Adequate rain during pollination could result in record corn yields.
The same goes for the soybean crop, which was 35 to 40 percent planted as of Nov. 5. Planting was delayed one to two weeks from last year.
Gobbee said there is newfound optimism in Argentina’s farm sector.
“Farmers are investing again in technology and they’re betting that with these new government conditions, they would have profits,” he said.
Fertilizer sales are up 50 percent over last year and sales of other crop inputs have risen 25 to 30 percent.
Planting is progressing rapidly in Brazil, where there is expected to be a small 1.23 million acre increase in soybeans.
Half of the soybean crop is in the ground, which is eight to 10 percent above normal.
The crop appears to be in good shape, but that was also the case last year. Analysts were predicting a harvest in excess of 100 million tonnes as late as March, but it came in five million tonnes less than that because of a drought that peaked in December and then again in April.
“This might happen again, so watch out,” Gobbee said.
He is forecasting 100 to 103 million tonnes of production with a 30 percent chance that it could climb as high as 105 to 107 million tonnes.
Brazilian farmers are expected to plant more corn, as are their counterparts in Argentina.
Gobbee is forecasting a 10 percent increase in plantings.
“We are witnessing a revival from last year and this is mainly because of the limited stocks that are making some of the local prices rise,” he said.
Poultry and hog companies are paying more for corn in an effort to boost first crop acres. They have been forced to import corn from the U.S.
He is forecasting 85 to 90 million tonnes of production depending on how much second crop corn goes in the ground. There will be an increase in second crop corn planting if the soybean crop is going well in February.
Eighty percent of Brazil’s corn crop is consumed domestically, mainly as feed. Gobbee expects exports to climb to 25 million tonnes from 18 million tonnes in 2015-16.
