Argentine soymeal factories take the brunt of trade war and taxes

Many Argentine soy crushing plants in Rosario have been shut down or downsized due to the Washington-Beijing trade spat. Argentina, once the world’s largest exporter of soyoil and soymeal, is currently struggling to compete with cheaper US products. The world’s largest soybean grower, the US, is now producing soymeal from its excess soy harvest, undercutting prices to Argentina’s traditional export destinations such as Vietnam and Indonesia.

The Rosario Grain Exchange increased Argentina’s soybean yield forecast to 52m tons in the 2018/19 season. Moreover, the Rosario Board of Trade (BCR) forecasts that Argentina will ship a record 14m tons of soybeans to China in 2019. However, the prospects of soymeal depend on how the trade war ends between the US and China. After calling a truce, China has recently pledged to buy 20m tons from the US. Nevertheless, it is unclear how the final agreement will affect future trade patterns.

International players, such as Bunge, Cargill, and Dreyfus, are adjusting by shifting crushing from Argentina to the US. However, local companies do not have that option and are forced to cut production. Reports suggest Archer Daniels Midland Co, with no crushing in Argentina, has profited hugely from Argentina’s circumstances and announced an 80% jump in oilseed profits in the fourth quarter of 2018.

Argentina’s current taxation system is also causing problems for the sector. Mauricio Macri’s strict austerity policy has led the country to impose an equal levy on soymeal and raw beans. Previously crushing was stimulated by lower tax rates.

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