Refuse to sell soybeans, corn and wheat abroad, leading to shortages and rising world prices
Argentina, a global food exporter, is struggling to find a middle ground between producers and government policies. This crack could lead to further increases in world prices for corn, soybeans and wheat.
Since the outbreak of the pandemic, Argentine farmers have struggled with surging government export taxes, severe inflation and a devaluation of their currency.
Meanwhile, producers are also dealing with fuel shortages resulting from the Russian conflict in Ukraine.
Inflation in Argentina is approaching 70% and experts predict it will reach up to 90% by the end of the year.
Runaway inflation contributes to one of the main problems farmers have with governments: payments.
Due to high tax withholding and poor exchange rates, growers receive less than 39% of the international price of their exported crops.
Analyst Juan Carlos Rasculine told the Epoch Times that about $62 of every $100 produced on farms per hectare is paid in taxes.
Lascurin is CEO of Grosvenor Square Consulting Group, specializing in economic policy in the Americas.
He said the farm tax structure established by President Alberto Fernandez’s administration could collect $300 million a year, of which about $200 million would come from soybean growers and the remaining $100 million from wheat farmers. explained.
The result is a scenario in which growers have no incentive to sell their crops on the international market, which drives up the price of their crops.
“This increase, like any other increase produced by higher tax rates on producers, will increase the prices of these basic commodities. Let’s go,” said Rasculane.
He also noted that in the long run Argentina would likely lose the wager of higher taxes as it would make its exports less competitive in international markets.
As a result, consumers look to neighboring countries such as Brazil for cheaper prices.
Export taxes hit 33% in May this year, sparking nationwide protests, roadblocks and a complete shutdown of the agricultural sector on 13 July.
Farmers have also started hoarding crops to sell domestically rather than exporting them to avoid falling export costs.
They use commodities as bargaining chips for more favorable economic policies.
Overall, growers sold only 46% of the soybeans harvested in July. By comparison, 57% of the soybean crop he sold at the same harvest stage in 2021.
A shortage of soybean, corn and wheat exports from Argentina could deal another blow to global commodity markets.
Raskulein said turmoil in the agricultural sector could push wheat prices back to where they were when the conflict between Russia and Ukraine began.
Last year, Argentina exported more than 60 million tonnes of grain, putting it on par with major European grain producers such as France.
Argentina’s Rural Federation President Jorge Quemes shut down the peasant demonstrations in July after calling them “cries of despair”.
“Not only because of tax pressure, [pro-agricultural] policy,” said Chemes.
He also noted the underlying “uncertainty and distrust” of the Fernandez administration.
It’s not the first time a left-wing government has tried to force Argentine farmers to pay for their exorbitant consumption habits.
“Export taxes on agricultural products have existed throughout most of Argentina’s modern history.
They have deepened since 2003 with Nestor Kirchner and Christina Kirchner coming to power,” political analyst Orlando Gutierrez Voronato told the Epoch Times.
Producer vs Peronism
Peasants and Peronist regimes have historically been at odds.
That’s because producers feel victimized by what they call the country’s reckless spending. Producers also accuse the left-leaning Peronist regime of being inefficient and corrupt.
Including the current government of which polarizing politician Christina Kirchner is Vice President.
A self-proclaimed “belligerent peronist” and an advocate for socialist economic policies, Kirchner served as president of the country from 2007 to 2015 after her late husband, former president Nestor Kirchner, resigned. .
Under the left-wing populist ideas of the husband-and-wife duo known locally as Kirchnerism, inflation has taken its toll 127 percent Between 2007 and 2012.
Even then, farmers bore the brunt of tax increases.
The former president and current vice president tried to raise the export tax from 35% to 44% in 2008.
Producers responded quickly with a complete closure of the agricultural sector and blockades of national roads across the country, in a coordinated effort between agricultural groups Rural Argentine Confederations, Rural Argentina Society and Coninagro.
But the Fernandez administration doesn’t seem to get the message that farmers will only tolerate being pushed so far.
And with rising inflation and volatile commodity markets, the stakes are higher than ever.
foreign currency cash cow
The agricultural sector plays another important role for struggling politicians in Argentina. It is a major source of foreign currency.
The depletion of government reserves to make payments as international credit dries up, combined with a flat local currency, has forced the country to use the dollar as a life raft.
Shipments of oilseeds and grains alone generated about US$33 billion last year.
The Fernandez administration has asked crop exporters and processors to generate $1 billion in sales in August, counting on cash injections to boost the country’s reserves.
Voronato notes that farmers have little incentive to meet this demand due to the declining official exchange rate of the Argentine peso.
“For each tonne exported, Argentinian producers receive $144, Uruguayan producers $512, Brazilian producers $510, and US producers $530,” he explained.
Lasculain continues to put pressure on farmers, and restricting access to the US dollar would exacerbate the existing economic crisis.
Current Economy Minister Sergio Massa said in a speech on August 3 that he plans to mobilize exporters to export $5 billion in the next 60 days.