Argentine Farmers to Delay Wheat Sales

Argentine farmers may delay wheat sales and plant less corn this year after the government announced a roughly 10% 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% but it would decline if the peso keeps falling, Reuters reported.

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 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% loss in the value of the Argentine peso against the US dollar last week alone, bringing to almost 50% its losses so far this year.

Argentina, with its vast Pampas grains belt, is the world’s No. 3 exporter of corn and raw soybeans. It is also the world’s top exporter of soymeal livestock feed and soyoil, used in making biofuels, as well as a wheat supplier, mainly to neighboring Brazil.

A 25.5% export tax that had been put on soybeans was dropped on Monday to 18%, as has the 23% tax placed on international soyoil and soymeal shipments.

But on top of that 18% tax, the three products will now be slapped with an additional levy of 4 pesos per export dollar, bringing the effective tax hike on soybeans and byproducts to 3 percentage points.

Meanwhile, Finance Minister Nicolas Dujovne will meet with the International Monetary Fund in Washington on Tuesday to push for accelerated payments from the financial lifeline arranged earlier this year.

When they meet, senior officials from both sides will seek a response that strikes a balance between domestic policy changes and external financing aid, a task that has been complicated by political and trust issues.

While Argentina is almost certain to get some concessions from the IMF, a decisive solution will be far more difficult and will require a lot of courage and skillful risk-taking on both sides.