Argentine farmers may delay wheat sales and plant less corn this year after the government announced a roughly 10 percent export tax on the grains on Monday as part of an austerity program designed to halt a run on the peso currency, growers and consultants said.
The measures announced by President Mauricio Macri's government include a tax of four pesos per dollar on wheat and corn shipments. That is currently equivalent to about 10 percent but it would decline if the peso keeps falling. While this season's wheat crop has already been planted, Argentina farmers may weigh the tax implications as they prepare to plant corn next month.
"This will make farmers sit down and recalculate how much corn they're going to plant," said David Hughes, a grower and president of the Argentrigo wheat industry chamber. He added that wheat sales could also be delayed as farmers watch the value of the peso.
"Farmers will be playing the exchange rate," he said. The new farm tax system is included in a package of measures Argentina is proposing to the International Monetary Fund to unlock early cash disbursements of a $50 billion standby financial agreement at negotiated earlier this year.
The tax revenues are needed to help reduce the fiscal deficit and calm market jitters about Argentina's ability to pay its debts next year, much of which is in US dollars. Investors' concerns sparked a 16 percent loss in the value of the Argentine peso against the US dollar last week alone, bringing to almost 50 percent its losses so far this year.
Argentina, with its vast Pampas grains belt, is the world's No. 3 exporter of corn and raw soyabeans. It is also the world's top exporter of soyameal livestock feed and soyaoil, used in making biofuels, as well as a wheat supplier, mainly to neighbouring Brazil.
As much as farmers may want to hang onto their wheat crops to take advantage of the swooning peso, they will need to sell at least some of their stocks to buy seeds and inputs for planting of the country's main cash crop, soyabeans, in October.
A 25.5 percent export tax that had been put on soyabeans was dropped on Monday to 18 percent, as has the 23 percent tax placed on international soyaoil and soyameal shipments.
But on top of that 18 percent tax, the three products will now be slapped with an additional levy of 4 pesos per export dollar, bringing the effective tax hike on soyabeans and byproducts to 3 percentage points.
"Soy export taxes will be a little higher. The impact on wheat and corn will be quite important," said Gustavo Lopez, head of the local Agritrend consultancy. "We will probably see an effect on corn plantings."
Growers are a major source of political support for Macri, who won office in late 2015 on a platform of ending the currency and trade controls favoured by his populist predecessor Cristina Fernandez, who feuded openly with the farm sector for years.
Macri defended the tax increases, which are due to end in 2020, as an emergency measure. He said exporters who had benefited from the slump in the peso needed to contribute more to the country's deficit-cutting program.
It is the primary fiscal deficit, projected at 2.6 percent of gross domestic product this year, that sparked questions about Argentina's ability to honour its 2019 debt obligations.
Farm groups panned the tax increases as an added expense for growers already struggling with high financing costs and the effects of a drought that hobbled this year's soya harvest.
Farmers say their costs have risen this year as many agricultural inputs like pesticides are priced in dollars. "This is a hard blow to farmers," said Dardo Chiesa, president of growers' umbrella group CRA. "They did not consult with us at all. It was presented as a done deal." The FAA chamber representing smaller farms said the new measures will not help growers with problems like high inflation, clocked in July at over 31 percent, and high borrowing costs after the central bank hiked its main interest rate to 60 percent last week.
Growers, like all Argentines, are also contending with higher energy bills since the government cut public utility subsidies as part of its deficit reduction program.