Argentina bumper wheat harvest could hit record if export tax cuts extended

By Maximilian Heath

BUENOS AIRES (Reuters) - Argentina's major Buenos Aires grains exchange, already forecasting a bumper wheat crop, could raise its estimates even higher if a temporary export tax cut until the end of June is extended, the body's chief economist told Reuters on Tuesday.

On the sidelines of an event to unveil the maiden forecast for 2025/26 wheat production, economist Ramiro Costa told Reuters that the current estimate of 20.5 million metric tons would go higher with an extended tax cut.

The possibility of an even higher - and potentially record - wheat harvest has not been previously reported.

Argentina is a key global wheat exporter - as well as a leading exporter of soy and corn. The current wheat harvest forecast would already mark its second-largest wheat production ever, just below the 22.4 million tons in the 2021/22 season.

In January, Argentina's government under libertarian President Javier Milei reduced until the end of June export taxes on wheat to 9.5% from 12% previously, as well as export tariffs on soy and corn, hoping to boost sales.

Milei, who favors tax reductions but needs farmers to speed up grains sales to bring in much-needed dollars, has said the government will not renew the tax breaks on grains exports after June, though the sector is pushing hard to get them extended.

"The current estimate is made with a tax of 12%, which is the one that will be in force again as of the end of June. If the government extends the current temporary reduction (the forecast) will be higher," Costa told Reuters.

Argentina's government on Monday also abandoned a crawling peg of the local currency and let the peso float freely against the dollar within a band of 1,000-1,400 pesos, leading to a sharp 10% weakening of the currency.

The weaker currency benefits farmers because it means they get more pesos in exchange for their export incomes in dollars, spurring more shipments. The easing of controls on the currency has been cheered by farmers.

"All these measures of the government are acceptable, but the tax burden is still not addressed," Buenos Aires grains exchange President José Martins said separately at the close of the presentation in Buenos Aires.

"Let's bet that this glass half full over the course of these months will end up being filled."

(Reporting by Maximilian Heath; Editing by Adam Jourdan and Marguerita Choy)