Brazil Tax Changes May Make US 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.

“This tax law basically increases costs, increases the tax burden of all corporations doing business in Brazil,” says Arlan Suderman, Chief Commodities Economist with StoneX. “And it’s just going to impact their domestic crush and processors in a way that may benefit demand for our soy oil and soy meal.”

Suderman says since this was an executive order signed by the president, this could be short lived- just 120 days- unless Brazil’s Congress ratifies it. What impact has it had and could it have on soybean futures?

“It temporarily gave us a rally, and then the market kind of forgot about it until it sees if Congress ratifies it. Basically, what it means for us now is absorbing some of that soy oil that our renewable diesel plants were not utilizing that we thought that they would by this time as we’ve been expanding crush capacity. It absorbs some of the soy meal on the market. We’ve seen of late stronger demand for soy meal, which has been helping that market and helping our domestic crush margins use up a little bit more of the soybeans that we have in this country. So, it’s a little bit incremental at this point until we know whether Brazil’s Congress ratifies it.”

After we conducted the interview Suderman early in the day Tuesday, he reached back out to us to let us know that it’s being reported that the administration in Brazil is considering withdrawing the tax change due to significant political pushback. Suderman says the StoneX team in Brazil believes that will happen, but it has not yet occurred at the time of this posting.

Hear how this situation came to be and other factors impacting global trade, including with China, in the full interview with Suderman below.

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