Brazil Tax Changes May Make U.S. Soybeans More Attractive

Reports are showing a surprising tax change in Brazil has the potential to make soy grown in the world’s largest soybean exporter less competitive with supplies from the U.S.

A provisional measure signed by Brazil’s president limits the ability of Brazil’s commodity exporters and processors to monetize tax credits. To compensate, merchants will likely have to raise soy prices, making beans grown in Brazil less competitive with American soybeans, at least in the short term. Amius Ltd., a risk management firm, says in this scenario, there would be a shift in soybean demand to the U.S., removing Brazil as a competitive source between August and September, accelerating the U.S. export program.

Arlan Suderman, Chief Commodities Economist with StoneX, says Brazilian soybean processors and biofuel producers will essentially have higher tax costs and lower margins. “The revenue drop will shift some crush and biofuel activity to Argentina and the U.S.,” Suderman told Reuters.