December 17, 2019 / 7:37 PM / a month ago

Argentina farmers switch to defense, cut investment, after tax hike bill

BUENOS AIRES, Dec 17 (Reuters) - Argentine farmers said they are switching to defense after the government announced new export taxes on Tuesday, reducing purchase of inputs needed to maximize production even though more than half of this year’s corn and soy is already planted.

The government wants to raise export taxes on wheat and corn to 15% from 12%, according to a bill sent to Congress. It would also raise the tax cap on soybean exports to 33% from 30%.

“This will bring more uncertainty to growers,” Pedro Vigneau, who has a farm outside the town of Bolivar in the heart of the bread-basket province of Buenos Aires, told Reuters.

Agriculture is Argentina’s main source of export dollars. Despite being the world’s No. 3 corn and soybean exporter, and its top supplier of soymeal livestock feed, the country’s economy has stalled, with inflation and poverty rising as the government gets set for tough debt restructuring talks.

About 55% of Argentina’s 2019/20 corn crop has been planted and 62% of this season’s soybeans. While seeds have been purchased and planting decisions made, Vigneau said jitters caused by higher-than-expected taxes will prompt growers to cut investment in fertilizers and pesticides.

“Farmers won’t invest without knowing what the rules are going to be. Fertilizers are one point, but also pesticides used to kill fungi,” he added. “We are going to a more defensive way of farming and that is not good for production.”

A cut in Argentine farm output could mark a missed opportunity as commodities-hungry China looks for alternative suppliers to fill the gap left by the United States, which has seen its exports drop in a protracted trade war with Beijing.

Left-leaning President Alberto Fernandez has vowed to raise money needed to restore social programs ditched by his conservative predecessor, Mauricio Macri. Fernandez won the October election after Macri’s popularity was undone by his tight fiscal policies.

Pablo Adreani, Buenos Aires-based head of AgriPac consultancy, said growers who have not purchased all their inputs for this year will re-evaluate how much they want to buy.

“It’s a bad sign for the farm sector,” he said. “No one knows if the government will want to increase taxes again next year. The uncertainty is pervasive.”

A decree telegraphing farm tax hikes was published over the weekend. Farmers said new taxes would pile hardship on a sector already struggling with prohibitive financing costs and dry weather that is threatening this season’s crops. (Reporting by Hugh Bronstein; Editing by Sandra Maler)

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