“Whenever an important market changes the rules it affects us.”

– HUGO PASTORE

Argentina has scrapped tax breaks on soybean imports to promote the use of Argentine beans in crushing plants, but industry analysts say the measure could aggravate tight supplies.

Argentina, the world’s top supplier of soyoil and soymeal, is also the No. 3 exporter of unprocessed soy. But repeated strikes by farmers in the last year have led crushers to import beans to keep plants operating at full capacity.

In a resolution published in the official gazette, the government said it was scrapping export tax exemptions on soymeal and soyoil made from imported beans in order to “protect farmers’ incomes.

“The use of domestic raw materials should be privileged,” the resolution said.

The measure is seen as a government effort to pressure Argentine farmers to sell millions of tonnes of old harvest beans they have been hoarding. This should ease pressure on the peso by boosting dollar flows.

“What the government’s trying to do is take a chunk of crushers’ supplies to force

them to go out more aggressively in the local market to get people to sell soy,” said Enrique Erize, an analyst at the Novitas consulting firm.

He said the step could worsen the impact of the drought-hit harvest on crushing activity by taking away another source of feedstock.

Farmers, already gathering 2008-09 soy, have been stashing 2007-08 beans in the hope of higher prices or a cut to the soy export taxes that have fuelled their bitter year-long dispute with centre-left President Cristina Fernandez.

Rosario grains exchange recently estimated that

farmers were hoarding some five million tonnes from the previous harvest, far more than they normally have left at this time of the year. Erize put the figure at about 4.5 million tonnes.

Paraguay, the world’s No. 4 soy supplier, exports between 1.5 million and 2.0 million tonnes to Argentina a year – still a relatively small quantity.

Whereas Argentina is expected to gather between 39 million and 43 million tonnes of 2008-09 soy, Paraguay’s harvest is estimated at about four million tonnes.

Paraguayan oilseed exporters reacted cautiously, saying they wanted more details of the measure in order to assess its impact. Soy is the country’s top export earner.

“Whenever an important market changes the rules it affects us,” said Hugo Pastore, head of Noble Paraguay, which exports to Argentina. “We need to know how far the measure goes … and to see what the Foreign Ministry says.”

Argentina’s year-long dispute over soy export taxes has seen increased use of Paraguayan soy by Argentine crushers. Some beans are also imported from Bolivia and southern Brazil.