Corn and soybean prices could experience a boost. The combination of additional grains purchased by China as part of a phase-one trade deal, and an Argentinian export duty, could put a floor under agricultural prices. The trade deal still needs to be completely worked through. China and the US have different definitions when it comes to Ag purchases. They also have different views of current tariffs. The only item that appears sure is that there has been a relaxation of tensions between the US and China. The upbeat fundamentals in conjunction with positive technicals, make online trading of agricultural products interesting.
Argentina Introduces Ag Export Tax
Argentina’s new left-wing government ramped up export taxes on grains and soybeans and their derivatives on Saturday December 14 which was widely expected. The Decree 37/2019 was issued by President Alberto Fernandez Frente De Todos which modified export duties. The decision eliminates a fixed export duty of 4 pesos per exported US dollar and replacing it with a 12% duty for corn, wheat, sorghum, sun seeds and barley, and a 30% export duty on for soybeans, soymeal and soy oil.
Total Revenues Rise from Export Duties
Overall duties are an increase of 5.3% points across the board, with the rates on soybeans and derivatives rising from 24.7% currently and those on grains increasing from 6.7%. The Agriculture Ministry also issued a resolution to suspend the register of grain and derivatives exports on Monday, December 16 to enable the new scheme of export duties to be implemented. It is unclear who will bare the brunt of the increase in export duties. Argentinian consumers will benefit as prices domestically should in theory decline by nearly 6%, as it is now more attractive for an Argentinian exporter to sell domestically.
Getting Head of the Duty
Export registrations surged as the market anticipated that a hike in export duties would be one of the earliest steps taken by Fernandez’s government to shore up its finances. To accommodate for the export duty increase, nearly 40K tons of organic corn were exported to the US in October.
Soybean prices have rallied in December rebounding and recovering nearly 50% of the November decline. A relaxation in trade tensions have brought prices back to the 50-day moving average which is seen as resistance. The range is capped by a downward sloping trend line near 9.55 per bushel. The floor is an upward sloping trend line near 8.67 per bushel. Momentum is positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the black with and upward sloping trajectory which points to higher prices for soybeans.