Argentina's government announced on Monday it had suspended exports of soybean flour and oil amid rumours it is planning to hike taxes due to soaring primary material costs blamed on Russia's invasion of Ukraine.
One expert told AFP the export freeze was likely a measure to prevent firms registering future exports before the tax rise comes into effect.
Argentina is the biggest exporter of soy meal for livestock feed and soy oil for cooking and biofuels. Farmers in the South American nation start harvesting beans at the end of the month, with the bulk of fieldwork done in April and May. Ukraine is a top global supplier of a competing oil made from sunflowers.
In total, soybean products made up 30 percent of Argentina's exports in 2021 and are worth around US$9 billion to the government.
The national government's agricultural markets undersecretary, a division of the Agriculture, Fisheries & Livestock Ministry, said in a statement that these exports were suspended "until further notice."
Shipments that are already committed will continue as normally, it added.
In 2021, soybean flour was Argentina's largest export (14.2 percent) with soybean oil its third biggest (6.9 percent).
Industry sources claim the government is analysing the possibility of increasing export tariffs on those two products to 33 percent from 31 percent. Such a move could bring in as much as US$450 million to the Alberto Fernández administration.
"The closure of exports is done to prevent businesses from registering [sales] before the tax modification," analyst Dante Romano told AFP. "But it should last just a short time and should not affect the international market."
Romano said the move is merely aimed at maximising government revenue and should not limit exports.
It comes as the cost of primary materials around the world has increased as a consequence of Russia's invasion of Ukraine and sanctions imposed on Russia by many Western nations. There are worries this could provoke an increase in food prices in Argentina which would send inflation soaring in a country that already has one of the highest rates in the world (totalling 50.9 percent in 2021).
A rise in the global price of wheat has already provoked an increase in the price of bread in Argentina – where 40 percent of the population lives in poverty.
Argentina is one of the world's major food producers and an increase in the price of primary materials could benefit the country. However, it also pushes up the price of food inside Argentina.
Unlike other food items such as wheat, corn and beef, Argentina does not limit the amount of soybean products that can be exported.
Argentina’s main farming groups lambasted the talk of a tax hike, saying in a statement that the agriculture industry can’t operate properly with unpredictable parameters.
Soy processors had bought and priced 2.2 million metric tons from farmers via forward contracts through March 2, according to government data, with none of that volume registered for export. Argentina is forecast to export 28 million tons of soy meal and 5.9m tons of soy oil this season, according to the US Department of Agriculture.
Argentina's union of agricultural producers expressed its "strong rejection" of any increase in taxes, adding that "there is no room to keep plundering producers."
"If it is to help the people eat then it makes sense, if it is to reduce the fiscal deficit then it doesn't," said Pedro Peretti, the former president of the Agrarian Federation.
The Mesa de Enlace industry group, which groups together four other agricultural groups, also issued a statement rejecting any future tax increases for agricultural exports.
"As a result of the versions that indicate that the national government is evaluating raising withholdings on wheat and corn, the Liaison Commission of Agricultural Entities expresses its strong rejection and anticipates that there is no room for them to continue plundering producers," he said.
The global commodities rally hit home for Argentina in a second way on Monday as state-run oil driller and refiner YPF SA hiked prices at the pump by about 10 percent to cover the soaring cost of diesel imports.
YPF’s drilling plans in shale patch Vaca Muerta depend on fuel sales. But the company also accounts for more than half of Argentina’s gasoline and diesel consumption, so the increase will likely be a blow to efforts to slow inflation.