Soy, still soya – 05/09/2019

Despite the clouds that insist on shaking the flight into the future. We commented on the newsletter Clarin RuralLast week, I had floated the butterfly in China and the effects were felt around the world. Especially in the soy world. And we already know with soy does not bump.

To the formidable impact on soybean demand generated by the expansion of African swine fever in China joined last Sunday the Threat launched by US President Donald Trump to impose 25% import duties to virtually all Chinese industrial products.

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The immediate consequence was collapse in soybean prices in Chicago. There, it is expected that the Chinese retaliation will be proportional. It should be remembered that Xi Jinping had imposed a 25% import duty on US soybean nearly a year ago, causing a Decrease in international prices by more than 10%. For a while, the problem did not concern soya from other origins (Brazil and Argentina). But swine fever came and the fall was for everyone. Now the aggravation of the commercial conflict.

This has an impact on the Argentine macro (where the soy complex explains 35% of exports for all purposes and all destinations) and of course in pocket farmers. At the macro level, the contribution of soya retentions or export duties in national accounts.

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The Mauricio Macri government wanted to reduce them, but could not. And last week ran the rumor This would give a twist, altering the current regime of 18% plus one dollar with 4 pesos removes. It turned out that there was a hole of about 700 million dollars that could be covered with this retouching. 10% more. In transcending the intention, exporters went out quickly to report their sales, while the inconvenience of rural. "It's a fruit", is a risky legislator known in the field.

But it was not a "fruit". Faced with the impossibility of advancing in a way that threatened a serious conflict with the agricultural sector, the government seized a plan B: apply a hidden import right, with the increase of statistical rate who pay for all the products Argentina buys. It was 0.5% and nobody gave it much importance, in a country complicated with large numbers. But it has been raised to 2.5% and now has an impact.

Of course, this has more impact on the industrial sectors, whose balance of trade is generally negative. It is obvious that an export tax is much heavier for the agricultural sector than a tax on imports. But Warning: everything the field uses to produce, except the earth, comes from the industry. The focus on inputs implies to affect the profitability equation. This is the case of fertilizers and agrochemicals.

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Export Deductions and Import Taxes Change the Input / Output Ratio. That is, they make the technology more expensive. During the last campaign, we had recorded a record consumption of fertilizer because it was sown thinking of a corn or corn without retention. When the harvest arrived, they nibbled 4 pesos per dollar. They were there, but now everything except Earth is going to cost more. This leads to a more terrestrial production than we add with technological intelligence. In other words, "extensive" production to more "intensive" production.

Y less durablebecause instead of exporting knowledge, we export the resource on which they apply: the soil. We have done it too long. We started to reverse the trend four years ago. We harvest, produce and record quality wheat and corn. Tax emergencies put thorns across.