The recent decision by the Argentinian government to propose a 15% export tax on Argentinian peanut exports has led to concerns over the sustainability of already agreed contracts in the European peanut sector. The proposed tax hike which was announced on Monday (18 December 2023) would take the effective tax rate on exported peanut products from 0% to 15%, though the timeframe on when this would be introduced has yet to be clarified.
“It’s very disappointing to see this news coming out of a government that has marketed itself as pro-business. We are coming out of a particularly difficult period which has seen some shellers almost go out of business and this could be the nail in the coffin depending on how much they have already contracted for 2024,” an Argentinian peanut sheller stated to Mintec.
A significant proportion of business in the European peanut markets is conducted via long-term contracts, with volumes and prices often being agreed well in advance of harvest. A large volume of the crop which is due for harvest in 2024 has already been sold on these contracts prior to the announcement of the increased tax levels, which is eroding sheller margins.
“This tax is likely to increase our costs by above $200 per tonne. At the same time, input costs remain elevated and for many contract prices have been agreed. This is going to cause major issues across the entire sector. Hopefully we can get some of the cost back on unsold loads, but it is a wait-and-see situation,” an Argentinian sheller said.
Longer term market participants expect at least some of this cost to be passed onto customers and there are concerns that it will impact the competitiveness of Argentinian peanuts into price sensitive markets.
“We have some leeway to pass on costs within the European market due to our dominant position, although this will be capped by availability from other origins, but in lower quality more price sensitive markets this would put us at a major disadvantage against our main competitors,” a sheller disclosed.
Speaking on the proposed tax increase, a spokesman from the Argentinian Peanut Chamber (CAM) stated to Mintec, "If the 15% export tax is approved by Congress we will certainly see an increase in prices. The CAM is working to dissuade the Government from presenting the bill in its current form."