A study recently completed and released by the United Soybean Board (USB) and soybean checkoff shows Argentina’s regime of taxing its whole soybeans for export at a higher rate than it taxes its soybean meal, oil and biodiesel destined for foreign markets costs the U.S. soybean industry up to $500 million annually.
“Our examination of this complex issue shows what results is an unfair subsidy in Argentina for processed soy products,” says USB Vice Chairman Marc Curtis, who also serves as the chair of the organization’s global opportunities (GO) committee. “The difference in those tax rates has distorted the international soy marketplace.”
The soybean checkoff-funded study found that the lower tax burden on Argentina’s soybean meal, oil and biodiesel creates a strong economic incentive for processing soybeans in Argentina. The country then exports these value-added products rather than whole soybeans. Argentina represents the third-largest soybean-producing country behind the U.S. and Brazil, but is now the biggest exporter of processed soybean products such as soybean meal, oil and biodiesel. Figures from the study show Argentina exports 99% of its soybean meal and 93% of its soybean oil in an average year.
LMC International, an independent economic and business consultancy serving agriculture, conducted the study for USB. It concluded that if the different tax schemes never existed, the U.S. would have invested more heavily in soybean-crushing capacity with an eye on export markets, which would have boosted U.S. soybean prices.
“This study shows that the U.S. experienced a larger decline in its share of the soybean meal and soybean oil export markets, in part due to the export tax structure in Argentina,” says Tom Hammer, president of the National Oilseeds Processors Association (NOPA), the U.S. organization representing 15 different oilseed processing companies in the U.S. “Brazil eliminated its differential export taxes in the mid-1990s and its share of value-added soybean meal and oil exports declined fairly dramatically while its exports of unprocessed soybeans increased.”
USB’s GO program, which works to improve market access for U.S. soy, conducted the study as part of its ongoing efforts to examine unfair trade practices.
“We can help ensure our soybean checkoff does all it can do to keep U.S. farmers and the rest of the U.S. soybean industry competitive and make certain we have equal and fair access to all markets around the world,” says Curtis, who grows soybeans, corn and wheat near Leland, MS.
NOPA’s Hammer notes Argentina has kept its export tax regime since the early 1980s. He believes it’s time for U.S. soybean farmers and the entire U.S. soy industry to point out Argentina’s distortion of global soy markets and its detriment to the U.S. soybean processing industry.
“If Argentina wants to tax its soy exports, it needs to do so at the same rates,” says Hammer. “The higher soybean crushing margins that would emerge in the U.S. would result in additional soybean crushing here. That would result in more profit potential for U.S. soybean farmers and the entire U.S. soybean industry.”
To see a complete version of the soybean checkoff-funded study, go to the “Global Opportunities” under “Programs” on the USB website.