Argentine oilseed crushers balm tax hike fears with deal; farmers still wary

BUENOS AIRES: Argentina's oilseed crushers have struck a deal with the government to hold down domestic edible oil prices in a potential salve to tensions after the country's president threatened to increase food export taxes to contain inflation.

The CIARA oilseed crushers chamber on Monday said the agreement on sunflower oil and sunflower-soy oil mix would help to ease government concerns about inflation, which a central bank poll recently forecast would be about 50% this year.

The chamber, which represents crushers that drive the country's huge processed soy export sector, said this could help to avert higher export taxes on their products, though farmers cautioned that taxes on other crops remained a threat.

"In this way, the tightening of exports logs and export duty hikes are avoided," CIARA said, citing commitments by the government to avoid distortion in the export market.

Argentina is the biggest global exporter of soybean oil and feed, is the No.3 exporter in corn and among the leading suppliers of wheat.

In recent months, international commodity prices have reached their highest in years. While this benefits Argentina's fiscal coffers and reserves, the government has pointed to the trend a factor driving up domestic prices.

Argentina's ruling Peronist coalition has in recent weeks called on the farming sector to propose solutions to keep domestic prices lower despite the global price trends.

Over the weekend Argentine President Alberto Fernández threatened to raise taxes or impose quotas on the farming sector if no solution was reached. It was unclear whether the agreement on edible oils would defuse that threat entirely.

In Argentina, wheat and corn exports are currently taxed at 12%, while soybean grain shipments are taxed at 33% and their derivatives at 31%. Unlike in previous Peronist governments, there are no export quotas for crops or meat.

"NECESSARY ENEMIES"

Carlos Achetoni, president of the Argentine Agrarian Federation (FAA), told Reuters that unlike oilseed crushers, farmers had few tools to influence final consumer prices, suggesting corn and wheat may be trickier points of tension.

Fernández's statements "indicate that we are guilty of supermarket shelf prices and the truth is that we are far from that, because we are not price makers," said Achetoni.

The FAA head said leaders of the four main rural associations were meeting on Monday, adding that farmers would be forced to respond if the government followed through on its threats of higher levies.

Argentina's farm sector has long had a turbulent relationship with Peronism, especially during the administration of Cristina Fernández de Kirchner between 2007 and 2015. She is currently Vice President.

The government last month restricted corn exports with the aim of limiting increases in meat prices, though walked that decision back after strong criticism and a commercial strike by the main rural associations.

The CARBAP rural association said in a statement that Fernandez appeared to be making farmers "the necessary enemies" in a year featuring mid-term elections.