Argentina, the worlds third-largest soybean exporter after the US and Brazil, on Thursday said that it will eliminate tax rebates on export of 200 food products, including soy-based vegetable oil.
The move, intended to slow the 9.8% rate of inflation in Argentina this year, may reduce vegetable-oil shipments and force processors in other countries to buy more soybeans.
According to industry analysts scrapping of rebate will reduce margins of processors of Argentina, forcing them to raise prices. On the other hand, US supplies will become more competitive. It is worth mentioning that, recently the Indian government reduced base import price of soy oil to $513 a ton, a sharp 18% lower from May last year. Coupled with lower import duty at 45%, Indias import of soybean oil is expected to increase by 18% this year.
According to the Central Organization for Oil Industry and Trade (COOIT), soy oil imports in the country may rise to 2.3 million metric tons in the year ending October 31, 2006, from an estimated 1.95 million ton. Palm oil imports may stay unchanged at 3.2 million ton, it said. An increase in soybean oil imports may mean higher prices for the commodity in Argentina and Brazil.
However, taking away export tax rebate from Argentine processors will increase the supply cost. On the other hand, US will be a strong contender to step in Argentine shoes in exporting to India. This is expected to push up the soy oil prices.
On the heels of Argentine announcement of withdrawing export tax rebate, soybeans for January delivery rose 14 cents, or 2.4%, to $6.015 on the Chicago Board of Trade (CBOT).
It is worth mentioning that US soybean oil prices have risen 14% this year on the CBOT. Palm oil prices in Malaysia have risen 4%. In India, the import tax on soybean oil is 45%, nearly half of that on palm oil which makes importing refined soybean oil cheaper by about $100 a ton than buying refined palm oil.
The lower tax has helped increase soybean oils share of the countrys total edible oil imports to 40% in the 11 months ended September 30, from 21% a year ago.
Palm oil accounted for 60%, down from 79% last year, according to the Solvent Extraction Association (SEA) of India, which represents 800 oilseed processors.
Soybean oil imports more than doubled to 1.8 million ton in the 11 months ended September 30, from 8,01,220 tons a year ago, SEA said last month. Palm oil imports fell 10% to 2.77 million ton.
(With inputs from agencies)