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July 3, 2017

Planting Prep on Hold in Paraguay due to Proposed Soy Export Tax

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The proposed tax on soybean exports out of Paraguay has placed Paraguayan farmers in a very difficult position just as they are making their final preparations for their 2017/18 planting. Farmers are concerned because if the proposed tax goes into effect for the 2017/18 growing season it could impact their acreage plans as well as their purchases of inputs and equipment.

The timing of a decision on the tax is important. The tax issue needs to be resolved no later than the end of July in order to allow time in August for farmers to decide on their input purchases to get the products delivered in time for the start of planting. There are no restrictions in Paraguay as to when farmers can start planting. They are allowed to plant whenever they feel the conditions are suitable. Typically, farmers in Paraguay may start planting corn by the end of August and they may start planting soybeans by the end of August or early September, if the conditions are acceptable.

An export tax on soybeans is being proposed as a way to increase revenue for the federal government and many politicians in Paraguay feel the ag sector is not paying its "fair share" of taxes. There are various proposals for the amount of tax from 5% to 15%. The President of Paraguay has expressed his opposition to the proposed export tax, but that does not necessarily mean that Congress won't try to impose the tax anyway.

Soybean production continues to increase in Paraguay and farmers would need to purchase additional equipment and inputs to handle the increased acreage, but some farmers have already canceled their purchases due to the uncertainty surrounding the tax. Many farmers' plans have been put on hold because suddenly the economic situation has changed. Farmers contend that a 15% export tax would make soybean production uneconomical and they don't want to commit to purchasing inputs until the tax issue has been resolved.