August 2009

Argentine Farmers Also Worried About Falling Soybean Prices

Slumping soybean prices are also a concern for Argentine farmers as well. The one advantage that Argentine farmers have is that they have the lowest cost of production of any major soybean producing country. The native fertility of the soils in the humid Pampas is quite high, so good soybean yields can be achieved with minimal fertilizer applications. They could also reduce costs by planting bin-run soybeans (which are already Roundup Ready) and then applying one application of Roundup, which is one of the cheapest herbicides available. Since most of the crop is also grown relatively close to the ports and processors, transportation is not a major issue in Argentina. Therefore, the actual growing of soybeans in Argentina is a relatively cheap proposition as compared to Brazil or the U.S.

Their big disadvantage is the fact that the Argentine government is going to reduce their soybean price by 35% by the imposition of an export tax totaling 35%. Farmers are hopeful that these export taxes could be reduced in the future, but nothing is going to happen any time soon. Even though the ruling party lost control of Congress in the mid-term elections held on June 28th, the newly elected Congress won’t be sworn in until December and nothing can be done about those export taxes until probably early next year, if then. Therefore, as Argentine farmers make their plans for the 2009-10 growing season, they cannot count on a lower soybean export tax.

Even though Argentine soybean farmers are worried about falling soybean prices, I still think they may increase their 2009-10-soybean acreage. Its not that they are eager to expand their soybean acreage, it more a case of soybeans being the least bad of all the alternatives. The Argentine wheat acreage is going to be down sharply from last year, which means there will be more acreage available for full season soybean production. Most of those wheat acres would have been followed by double crop soybeans, but this year they may be planted to full season soybeans instead of double crop soybeans. As far as corn is concerned, I don’t think Argentine farmers will be anxious to expand their corn acreage, not at these prices and the fact that corn is much more expensive to grow.

Even though corn has a lower export tax than soybeans, the government could be more inclined to manipulate the corn export market in order to hold down the cost of feed and which helps to keep meat prices in check. Very few soybeans are used domestically in Argentina, so therefore the government is less inclined to attempt to manipulate the soybean export market. The government is perfectly content to export as many soybeans as possible as long as the export taxes are levied.

Even though corn has a lower export tax than soybeans, the government could be more inclined to manipulate the corn export market in order to hold down the cost of feed and which helps to keep meat prices in check. Very few soybeans are used domestically in Argentina, so therefore the government is less inclined to attempt to manipulate the soybean export market. The government is perfectly content to export as many soybeans as possible as long as the export taxes are levied.