Argentina’s soybean growers may plant more of the crop for this season than previously estimated, encouraged by a tax rebate announced earlier this month as President Mauricio Macri maneuvers to bolster support in an opposition stronghold.
The rebate in 2017 of 5 percent on exports across 10 northern provinces will propel a shift by some farmers to soybeans during planting in December, said Esteban J. Copati and Ramiro Costa, analysts at the Buenos Aires Grain Exchange.
The exchange had seen some farmers switching to wheat and corn for the 2016-17 season, after Macri swiftly scrapped export taxes on those crops last year. It also saw a decline in the area planted with soy. But that picture has changed, according to Copati, the head of estimates at the grain exchange.
"It’s likely there’ll be an expansion of soy in the northern provinces," he said in an interview.
Global soy output has outpaced Argentine production.
The shifting outlook points to the interplay between Argentine politics and soybean production in the third-largest grower of the crop. Any change in output will be watched closely by traders and rival producers worldwide as the soybean market is already oversupplied.
Macri, who took office last December, reneged earlier this month on a campaign pledge to reduce the tax on soybean exports to 25 percent in 2017 from 30 percent now. That disappointed farmers who had looked to lower tariffs as a way to boost shipments to foreign buyers. Macri mitigated the bad news by unveiling the rebate for the northern provinces, which produce less than 10 percent of Argentina’s soy. They needed the tax benefit more than farmers in the country’s Pampas further south because they’re far from export ports, said Sergio Berensztein, a political analyst in Buenos Aires.
Macri lost eight of the 10 northern provinces in last year’s presidential election. With Argentina’s economy sputtering, he is searching for ways to secure votes ahead of midterm elections in 2017.
"It’s an astute move, a win-win," Berensztein said in a phone interview, referring to how the policy would favor northern soy producers and, in turn, help drive support toward Macri.
Based on the most recent estimate from the Buenos Aires exchange, made earlier this month, the area in Argentina planted with soybeans is predicted to decline to 19.6 million hectares (48.4 million acres) in the 2016-17 crop year, from 20.1 million hectares in 2015-16. Production is estimated at 53 million metric tons. But those projections are under review, and Copati said the bourse will revise its figures in about two weeks.
The U.S. Department of Agriculture also said in a report this week that it may need to reevaluate its forecast.
Farmers in the Pampas, Argentina’s soybean heartland, are unlikely to turn away from soy this season, despite not being eligible for the rebate announced Oct. 3, said Ernesto Ambrosetti, chief economist at Sociedad Rural Argentina, one of the country’s four big farming associations. But delaying the pledged 5 percentage-point cut in export taxes may cause some of them to shun the crop in 2018, according to Dardo A. Chiesa, president of Confederaciones Rurales Argentinas.
Soybean futures for delivery in November rose 0.8 percent to $9.805 a bushel at 11:21 a.m. in Chicago.