Monsanto Co. executives said they’re hopeful that Sunday’s presidential election vote in Argentina will lead to an overhaul of agricultural policies that have been blamed for a slump in production and exports from one of the biggest producers of corn and soybeans.
Mauricio Macri, the opposition candidate and the frontrunner in voter surveys, has pledged for months to end export taxes of 23 percent on corn and 35 percent on soybeans. His rival in the runoff, Daniel Scioli, who’s backed by President Cristina Fernandez de Kirchner, said in October he’ll do the same.
Such a change would almost certainly be welcomed by most if not all the farmers who have protested for years over the taxes, hoarding production rather than pay up. For Monsanto, the world’s largest supplier of seeds, the Latin American country is an important growth market that could help it reach a target for higher earnings over the next four years. Ending the tariffs would incentivize sowing more acres, Chief Executive Officer Hugh Grant said.
"Growers in Argentina at the moment think twice before they plant, because the first piece of that harvest goes to the government,” he said in an interview Wednesday in St. Louis after the conclusion of two days of investor presentations.
Argentina has shipped $17.6 billion of grains and oilseeds abroad so far this year, the lowest for the period since 2009, according to data from an exporters group. Export tariffs have erased $10 billion a year in foreign agricultural sales, according to Jorge Brito, chairman of cattle producer Inversora Juramento SA.
Also in need of reform, according to Mike Frank, Monsanto’s global commercial vice president, are government policies limiting farm leases to one year. The current situation inhibits long-term investment in a country where half of agricultural land is rented, he said, as well as discouraging crop rotation, which can help stop pests developing resistance to crop-specific insecticides.
"I get a chance to meet with farmers from all over the world, and I would say the farmers that are the most challenged today are farmers in Argentina," Frank said.
There are already signs of optimism among the country’s farmers. A Buenos Aires Grain Exchange report in September forecast they would cut as much as 20 percent of the corn planting area this season and soybean planting by 1 percent, but that outlook may be raised because changes to the export taxes are increasingly likely, said Esteban Copati, chief analyst at the exchange.
Argentina remains the third-biggest grower of soybeans and the fourth-largest exporter of corn. Monsanto gets about 6 percent of its revenue from the country and is counting on farmers there and in Brazil to buy its new Intacta soybeans, which are genetically modified to ward off insects and tolerate the application of weedkiller. Intacta sales in Latin America will be one of the three main drivers of profit growth through 2019, Grant told investors this week.
Another potential boost to the company is an agreement reached with grain handlers to collect Intacta royalty payments from farmers on the company’s behalf. Monsanto has had trouble getting paid by farmers for its modified soybeans, which are widely pirated in Argentina.
Monsanto withdrew a $47 billion takeover bid for pesticide maker Syngenta AG in August, and since then Grant has told investors his company doesn’t need an acquisition to achieve its goals for higher earnings. “We feel good” about Monsanto’s strategy, he said Wednesday. In Argentina, he said he’s encouraged by the promises of both candidates but wants to see what changes are enacted after Sunday’s election.
"The proof is in the delivery,” Grant said.