South America Calling
Alastair Stewart South America Correspondent

Thursday 11/15/12

Brazil Cedes to Argentina on Soy Crushing

Brazil may surpass the U.S. to become the world's No. 1 soybean producer in 2012-13 but it is only the No. 4 soybean crusher.

Of last season's 66.6 million metric ton crop, nearly half -- 31.5 million -- will be exported in bean form.

Obviously, by exporting the raw material instead of processing here and then shipping meal and oil, Brazil is limiting the revenues, jobs and trade dollars gained from this massive industry.

So why does this happen?

There are a couple of structural reasons: First, China, Brazil's main soy client, has over the last 10 years sought to import beans to supply its own crushing industry, rather than import meal and oil. Second, the geographical spread of soybean production and crushing puts Brazil at a disadvantage to its main competitor Argentina, which concentrates crushing at huge port facilities.

But the third reason is exclusively of the Brazilian's making. Rather bizarrely, Brazilian soymeal and soyoil exports have a tax burden, while soybeans can be shipped tariff-free.

Soymeal and soyoil production is saddled by various levies, including ICMS sales tax and Funrural and PIS/Cofins social security contributions, explains the Brazilian Vegetable Oil Industry Association (ABIOVE). Crushers in theory can get most of these taxes back when they export but, in practice, the rebates can take years to come through or are offered in the form of tax credits that exporters find difficult to use.

"Brazil is the only country in the world that promotes the export of primary products to the detriment of value-added products," said ABIOVE in a statement.

As a result, trading companies choose to export, leaving plants underutilized.

Brazil only used 67% of its installed crushing capacity in 2012.

In Argentina, more logically meal and oil shipments are taxed at a lower rate than beans.

As a result, investment in Argentine soybean processing has considerably outstripped that in Brazil in recent years.

Back in 1996, Argentine crushing capacity was half that of Brazil but now it outstrips its neighbor. In 2011, Argentina could crush 175,000 metric tons of soybeans per day against 169,000 in Brazil.

Posted at 11:50AM CST 11/15/12 by Alastair Stewart
Post a Blog Comment:
Your Comment:
DTN reserves the right to delete comments posted to any of our blogs and forums, for reasons including profanity, libel, irrelevant personal attacks and advertisements.
Blog Home Pages
March  2015
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31            
Subscribe to South America Calling RSS
Recent Blog Posts
  • Brazil's Crisis and Soy
  • Agroconsult Raises Brazil 2014-15 Soy View to 95.8 MMT
  • Brazilian Soy Harvest 59% Complete
  • Brazil's Minas, East Goias Soy Hurt By Dry January
  • Drought Hurts Brazil Bahia Crop, Late Planting Limits Losses
  • AgRural Raises Brazil Soy Crop View on Excellent South
  • Blockades, Weak Real Dictate Brazil Soy Market
  • Brazil's Soy Harvest 29% Complete
  • Brazil Trucker Protest Continues Through Ninth Day
  • Agroconsult Raises Brazil Soy View to 94.7 MMT
  • Brazil Truckers, Government Reach Agreement; Blockades Continue
  • Truckers Block Mato Grosso Soy Routes
  • Rains Hinder Brazil's Soybean Harvest
  • Dollar Bump Fails to Draw Soy Farms to Market
  • Brazil Set To Raise Ethanol Mix
  • Argentine Farms Look To Paraguay
  • Brazil's Antitrust Body Approves Cosan/ALL Deal
  • Brazil's Ag Ministry Lowers Soy, 2nd Corn View
  • Brazil's Abiove Raises Soybean View to 92.3 MMT
  • Logistics Monopoly Concerns Brazil's Soy Industry