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A tariff acts as an added cost of transportation, making shippers unwilling to ship goods unless

the price difference between the domestic and foreign markets exceeds the tariff.
If shippers are unwilling to ship wheat, there is excess demand for wheat in the domestic market
and excess supply in the foreign market.
The price of wheat will tend to rise in the domestic market.
The price of wheat will tend to fall in the foreign market.
PRINTABLE VERSION EMAIL TO A FRIEND RSS FEEDS 11:29 UK, 29
th
Jan 2014, by Agrimoney.com
Talk grows of rise to Argentine soy export tax
Speculation is growing that Argentina will raise its
export taxes on soybeans to raise much-needed state
revenues, denting farmers' efforts to protect their own
finances from the collapse in the peso.
Rumours have started that the country is poised to lift
its soybean export tax from 35% to 40%, although there
has been no official indication of such a move.
Such a tax rise would echo the reaction to the time of
the country's last severe economic crisis, 12 years ago,
when the government imposed the export duty -
initially at 10% for oilseeds, on top of a domestic tax of
3.5%, with soyoil shipments charged at 4.3% and
soymeal at 5%.
"I would not be surprised if they tried something similar
once again," said Michael Cordonnier, the influential
crop scout with strong South American sources, adding
that such an increase would "certainly launch protests
against the action" by farmers, who have a history of
anti-government demonstrations.
'Windfall profits'
Argentina's government could justify such an action
"based on the devaluation of the peso, which they
would consider 'windfall profits' for farmers", Dr
Cordonnier said.
The devaluation of the peso, which plunged 15% to a
record low on Thursday, has rewarded farmers' of
withholding crops, which are denominated in dollars, as


a hedge.
Argentine farmers are estimated to be holding about
7m-8.4m tonnes of soybeans, compared with 1.6m
tonnes a year ago.
Indeed, the peso's plunge has sparked debate in
markets about how farmers will react whether the
peso's decline will encourage them to sell up and take
profits, in peso terms, on their holdings or to hold tight
for fear of further devaluation.
Tax rise vs devaluation threat
"You might think that even the threat of a rise in export
taxes would encourage farmers to sell, and that the
government might dangle that in front of farmers as a
political move to try to free up these [crop]
inventories," a UK-based South American economist
told Agrimoney.com.
"But given the way the peso has behaved, I would
expect farmers to hold on for now. A 5% rise in export
taxes is nothing compared with what they might lose
from further devaluation."
At New York-based broker Jefferies Bache, Anne Frick
noted that farmer crop hoarding in 2002, amid severe
financial fears, had "backfired" when the export levies
were imposed in March of that year.
"Eventually, farmers did sell their soybeans in 2002,
even if reluctantly."
Official vs blue
She added the devaluation of the peso "might have
some impact on Argentine farmer selling but only if it
were to narrow the official versus black market
exchange rate".
The Argentine government has imposed an official
exchange rate against the dollar well above black
market rates. Earlier last week, the official rate of 6.9
pesos to $1, compared with a black market or so-
called "blue market" rate of nearly 12 pesos to $1.
Moves by Argentina to loosen currency controls "might
help with that".
However, hoarding crops protects growers from
inflation which many economists estimate privately at
about 28%, well above the 11% rate proposed by
official data, whose inaccuracy has earned Argentina
condemnation from the International Monetary Fund.'
'They will not sell any more'
"Strong holding by Argentine farmers this spring could
support prices relative to where they otherwise would
have been," Ms Frick said.
Dr Cordonnier said that farmers "still have an estimated
8m tonnes of last year's soybean crop in storage and
they will not sell any more of those soybeans any time
soon".
Argentina's wide use of silo bags reduces the need for
sales merely to clear storage space for the next harvest,
due to start around March.
"It costs approximately $5.00 per tonne to put the
soybeans into the bags and to extract the soybeans at a
later date.
"If the soybeans are put in the bag at 13.5% moisture or
less, they can remain in the bags indefinitely, or at least
12 months or longer."

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