BUENOS AIRES - Spot trading on Argentina's main grains and oilseed market has slowed sharply as farmers hold on to their crops in the expectation this month's presidential run-off vote will lead to a reduction in hefty export taxes.
Ruling party candidate Daniel Scioli has been forced to follow his conservative challenger Mauricio Macri's lead with a promise to scrap export taxes on corn and wheat, and a gradual reduction of the levy on soy shipments. With under three weeks until the second round, analysts say Macri is the slim favorite.
"Macri and Scioli now both talk about removing export taxes. If a farmer doesn't need money right now, he's sitting tight," said Guillermo Moulia, a trader at the local grains brokerage Guardatti Torti.
Fernandez's government hits farmers with a 35 percent tax on soybean exports while corn and wheat are taxed at rates of 20 percent and 23 percent respectively. There are also quotas on corn and wheat exports to keep local prices low.
Moulia said wheat volumes were non-existent in the spot market and estimated the Rosario grains exchange, the country's main grains trading hub, was handling half the usual soy volumes for the time of year. Soy traded at 2,250 pesos per ton in Rosario on Tuesday, just off a six month high.
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Meanwhile, the price of corn on the local futures market had risen to $145 per ton from about $115 a month ago, Moulia said, reflecting optimism the taxes will be lifted.
Whoever replaces outgoing leader Cristina Fernandez is likely to have to accelerate the devaluation of the peso currency, whose level is closely controlled by the central bank. Macri's talk of swiftly unwinding capital controls point to a sharp devaluation while Scioli, who advocates only gradual changes, says a shock weakening is avoidable.
"Even if they don't scrap the taxes, the improved exchange rate means farmers win," said Pablo Adreani, director of the agro-industry consultancy Agripac.
Macri also vows to scrap the grains export quotas, a move farmers say would be a huge incentive to switch some soy fields back to over to corn after years of interventionist policies that hammered down corn's profitability.
Argentine farmers have long hoarded their crops as a hedge against the country's high inflation rate.
Argentina's tax agency said this week farmers were holding back an estimated 19.7 million tons of soy - equivalent to one third of Argentina's annual soy crop - as well as 21.4 million tons of corn and 9.5 million tons of wheat.
