65% of producers’ income remains in the hands of the State at its various levels: 94% national, 5% provincial and the rest municipal. This is indicated by the latest report from the Agricultural Foundation for the Development of Argentina.
Compared to the last report, the index rose by 6 points in December. The main reasons are rising costs and falling prices.
“To understand why the tax burden has increased, we need to focus on what the FADA index measures: how much of agricultural income goes to taxes. Income is the result of subtracting production costs from the value of production carried out. If the price drops or costs increase, income decreases. But the problem is that taxes do not reduce in the same proportion as income, in fact, they almost do not.. This is why when value decreases or costs increase, your income tax rate increases. This is what emerged from this measurement, and this is why the FADA index is 6 points higher than the last edition”, adds Nicolle Pisani Claro, chief economist of FADA.
In the context of national taxes, 67% do not agree with the Provinces, that is, they do not return to the regions that produced it. «From here comes the discussion on the federalism of a scheme in which most of what is collected is not distributed to the provinces, in an activity that by definition is federal and is rooted in the different regions of the country», he highlights. For his part, Ariño, an economist at FADA, stands out.
“Córdoba records 64.9%, Buenos Aires 61.9%, Santa Fe 61.1%, La Pampa 62.9%, Entre Ríos 65.4% and San Luis 59.9%. To measure it, yields, provincial and local taxes and freight are combined, which generate differentiated effects on each crop. As well as the proportion of each crop on the vineyard area of each province”, explains Pisani Claro.
In this particular measurement, we considers increases for the year 2024 of rural properties, rates and municipal guides. In the particular case of the real estate sector, increases ranging from 180% to 250% have been recorded, depending on the province.
What happened to costs?
As for production costs, the report reveals this Freight rates increased by 42% in pesos, compared to December 2023. Sowing work 59% and harvesting 132%. Compared to March 2023, there was an increase in freight rates of 206% and in labor of between 170% and 260%. If we analyze the structure of crop costs based on the currency in which they are expressed, we find that 49% of costs, the costs of one hectare of soybeans are strictly dollarised while the remaining 51% is weighted. If we consider the cost of land within the cost scheme, thosedollarized in one hectare of soybeans represent 62%.
In the case of corn, since fertilizers and seeds have a greater weight than soybeans, thedollarized costs amount to 53% of the structure, while the weighted costs reach 47%. When considering the cost of land, the dollar cost weight amounts to 60%.
In this edition of the report, the peso and dollar components were distributed more similarly than in the December 2023 measurement. In that month the peso component had decreased after the devaluation, which currently shows us an increase in the prices of goods and labor as of early 2024, when measured in dollars.
Price drop
While the weighted average of crops at a national level is 65%, The state’s share in soybeans is 68.4%, in corn 57.3%, in wheat 83.9% and in sunflower 54.1%.
Even with higher production levels after recovery from drought, falling prices reduce the gross value of production. In this context, with lower prices, rising costs and updates to provincial and municipal taxes, greater pressure is generated on state participation in agricultural income.
The largest drop in prices occurs in wheat, which in turn indicated the highest participation of the State in revenues in March 2024. In this context and facing the next good season, the numbers begin to adjust, considering that this drop in prices is accompanied by an increase in inputs and services.
Source: Clarin
