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November 8, 2018

Brazil's Biodiesel Producers Propose 10% Tax on Soybean Exports

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

The Brazilian Union of Biodiesel and Biokerosene Producers (Ubrabio), proposed earlier this week a 10% tax on soybean exports in order to help the domestic Brazilian soybean processors compete with exporters for supplies of soybeans. The revenue from the proposed tax would be distributed to crushers who have been operating in the red due to strong premiums being paid by exporters in order to satisfy the demand for soybeans from China. They proposed that the payments would be in proportion to a company's sales volume of soybean meal.

The chairman of Ubrabio contends that the soybean market is being distorted by the trade dispute between the U.S. and China and that Brazilian soybean crushers are being impacted twice by the dispute. First, they must pay more for domestic supplies of soybeans in order to compete with the high premiums being paid by exporters at the ports. Second, they cannot compete in the international market with U.S. soybean meal and soybean oil because U.S. crushers are paying much less for U.S. soybeans.

Ubrabio contends that while Brazilian farmers are benefiting from the strong soybean prices, the crushers and the livestock producers in Brazil are being negatively impacted because soybean meal is a major component of hog and poultry rations.

Ubrabio estimates that the 10% tax would generate 3.14 billion dollars in 2019. The chairman was asked if a 10% tax on soybeans, which would be paid for by lower prices paid to farmers, would be hard to sell to Brazilian farmers. His response was that in the long run it would benefit Brazilian farmers by keeping the processing industry healthy and that they could then compete with exporters and pay higher prices for domestic supplies of soybeans.

Ubrabio is soliciting support from other agricultural groups in their effort to convince Brazil's new president of the merits of their proposal. The Brazilian Association of Vegetable Oil Industries (Abiove) has already stated their opposition to the proposal. President-elect Jair Blosonaro will take office as Brazil's new president on January 1, 2019.