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Argentina’s farmers to strike next week, no soybean exports expected

Farmers line up tractors in protest.

Due to a strike next week by farmers in protest of a government tax hike, Argentina will not be exporting soybeans.

After the good news that Argentina’s soybean output projection was raised by over 1 million metric tons last week due to good weather, Argentinian president Alberto Fernandez has demonstrated that the country’s farmers will have a long-lasting tax nightmare.

Fernandez, who was elected last year to a four-year term, confirmed on Sunday he would raise export taxes only on soybean exports, from a rate of 30% to 33%. The hike was then discussed this week in a meeting between the president and the top farming association heads from the S. American nation. According to the four largest associations, the government pretended to have a discussion on the issue, but just informed the country the hike.  

This time around, there was no window to anticipate any sales. The government prohibited exports before the law took effect on Monday. As a reaction, the Rural Confederations of Argentina called for a national strike starting this upcoming Monday until Thursday.

The strike, a tool used in past tax hikes in Argentina and reported frequently in, will consist of a lock-out of soybean sales in the period announced. Previous lockouts have lasted for many months.

The apex of farming lock-outs in Argentina was when the current president Alberto Fernandez was the chief of staff for former president Cristina Kirchner in 2008; there was an intention to hike export taxes in 35%, which the government then lost in the parliamentary battle. The protest strategies at that time included blockades of several roads around the country and including stopping sending food products, like milk, to cities.

Next week, no farm association is calling to block roads. Some farmers are putting their tractors on roads to protest, but there are no cases reported of blockades so far. A strong concentration of tractors is seen on the national 9 road of Córdoba.

“One more time the agricultural producers all over our country are forced to take extraordinary measures to defend the most dignifying condition of a man’s soul – work. The solution for everyday people’s problems from our government has always been the same. Export taxes and more taxes,” according to the Confederation’s press release Friday.

Throughout history, Argentina’s government has used export taxes, and more specifically on farm exports, because these are the fastest generated taxes that could avoid exploiting interest rates from public debt. And the agricultural sector is responsible for over 50% of the country’s exports. To have a rough idea, the JP Morgan Country Risk index, which measures the risk of default, says Argentina has the second-worst score just below Venezuela with 2,500 points.  The U.S. has 219 points, Brazil has 239, and Japan has 53 points. The lower the score, the more credible a country is.

Most farm leaders don’t want to escalate the conflict now. From the market standpoint, that is not likely. But that trend would be overturned in the longer term.

“I doubt it will be a very strong strike because harvest is about to start. They have to harvest and send the trucks to the port, but unfortunately, the conflict will escalate,” said Pablo Fraga, a market analyst at brokerage Roagro.

According to Fraga’s analysis, a farmer in the northern part of the Buenos Aires province, in central Argentina, needs a yield of 52.08 bushels per acre and a price of at least $230 per ton of soybeans to have positive numbers growing the crop.

“For the risk assumed, the profitability should be at least 15%. To achieve that, you need a price of at least $240 per ton and a yield of 56.47 bushels per acre,” concluded Fraga.

Argentine farmers disagree with being blamed for the country’s crisis. The tiny farmers feel they are taxed as high as the large farm corporations.

“When the government talks about 1,000 tons sold and uses this to tag us as fat cats, that is what makes me angry. It is absolutely false that I’m a rich person,” stated Alberto Tonelli, a farmer who owns 1,000 acres all planted with soybeans in the location of San Nicolas, province of Buenos Aires.

A new report from the Buenos Aires Cereal Exchange says that 57% of the total soybean surface planted in the country (42.9 million acres) is under dry conditions and projects there will be no increases in production estimates. Their new target is 54.5 million metric tons. The Rosario Board of Trade projects 50 million.

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