How is agricultural profitability this year? What will happen in the 2024/25 campaign? In the latest edition of the Productive Monitor, the economist of the Mediterranean Foundation Franco Artusso analyzed the agricultural margins and came to the conclusion that In the core zone, net margins after taxes averaged US$373/ha between January and August 2024, with an improvement of 42% compared to 2023, while in the extra-Pampa zone the margins remain negative, with an average of US$ s 102/ha, 16% below the previous year. The analysis advances the agricultural margins “between cottons” for the next campaign.
Meanwhile, regarding the impact of taxes, it determined that the tax burden continues to be significant, with 62% of the income captured by taxes in the core zone and 77% in the extra-Pampean zone. This implies that producers only appropriate 38% and 23% of the income generated, respectively.
Regarding the prospects for 2025, Artusso spoke that margins are projected to be 65-70% lower than in 2022, with values of US$318/ha in the core area and US$145/ha in the extra-Pampean area, due to prices. expected for soybeans and corn.
“This document presents an estimate of agricultural profitability before and after taxes for the case of two models with different levels of efficiency in grain production: one captures the particularities of the core area (Pampean region) and another attempts to represent to the great extra-pampas region. The main differences between the two are due to the productivity of the land (crop yields) and the distances to the port (freight transportation cost), but the different input and labor requirements depending on geographical location (direct production costs) also influence. Artusso explained.
Specifically, the report considered the average yields of each region, except for corn in the extra-pampa area (center-north of the country), which is adjusted 30% below the average to capture the negative effect that “the leafhopper” had in these areas. , it is estimated that between January-August of this year the producer’s net margin (after taxes) averaged US$373/hta in the core area (southeast of Córdoba) and US$102/hta in the extra-Pampa zone (general assumptions: 500 hectares , own field, 50% soy – 50% corn).
core zone
In the core area, an improvement of 42% is observed with respect to the margins of the 2023 drought (US$263/hta), but in the extra-Pampa zone, even 16% worse was found (US$122/hta) and two consecutive years of poor results in the region. “In perspective, this year’s margins are 60-80% below the 2022 records prior to the drought, mainly due to the drop in grain prices,” highlights the Ieral economist.
In both cases, “what the State takes” through tax collection from agricultural activity is greater than “what remains” ultimately to the producer. Between January and August of this year, the margin before taxes (income minus costs) was US$968/hta in the core zone and US$445/hta in the extra-Pampa zone, the payment of taxes (national and provincial) increased au$s 595 and u$s 343 per hectare and the producer was left with u$s 373 and u$s 102 per hectare, respectively.
From the above it follows that the total tax burden was 62% in the core zone and 77% in the extra-Pampean zone. This is defined as the percentage of the income that the producer generates (income minus costs) but cannot appropriate due to the tax obligations that must be faced and/or the distortions that these generate on the activity. Seen another way, after paying taxes, the agricultural producer in the core zone was left with only 38% of the income he generated with his activity and the producer in the extra-Pampean zone was left with 23%.
As follows?
The projected margins for 2025 assume “normal” average yields in both areas, for both soybeans and corn. It is assumed that in extra-pampa zones the adjustment variable for the “chicharrita” effect of corn will be the planting area and not so much the average yield (producers who foresee yield reductions similar to those of 2024 will not directly plant the crop). All else equal, given the expected prices for soybeans and corn in Chicago in 2025 ($389 and $197 per ton, respectively), margins (after taxes) are yielding $318/hta in the area. core yu$s 145/hta in the extra-Pampean zone, 65-70% below the last year in which “normal” yields were recorded in both zones (2022).
“Something that is observed in this projection is that, with the fall in prices and against the margins, the total tax burden on agricultural producers would increase towards the end of the year: from 62% to 67% in the core zone and from 77% 92% in the extra-Pampean zone,” explained the economist from Fundación Mediterránea.
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Meanwhile, the report clarifies that given the expected price scenario for grains in 2025, assuming that costs remain constant in dollars and that yields are located in the usual average of the areas for “normal” years (without events extraordinary events such as droughts or unexpected pests such as the leafhopper), If there were no changes in the tax structure (taxes and rates), the burden on the producer would remain around 63% in the core zone and would drop from 81% to 71% in the extra-Pampean zone. The latter is subject to the normalization of corn yields after the leafhopper, which is ultimately what is determining the decision to plant the crop or not in these areas, it was clarified.
