March 2, 2009

Argentina's two leading papers are reporting that the government is considering a complete takeover of the commercialization of grains amid tense negotiations between farmers and the government to avoid a repeat of last year's crippling farm strikes.

 

La Nacion and Clarin both said in front page articles Friday (February 27) that a plan to transfer control of all purchases and exports to the agricultural trade office was under study. However, a government source denied Friday any knowledge of the plan.

 

The versions are seen by many as a likely government attempt to turn up the pressure on farmers ahead of a planned meeting between farm group leaders and Production Minister Debora Giorgi on Tuesday. An initial meeting was held last Tuesday, after which farmers said that a start had been made in resolving sticking points, but that many issues still need to be resolved.

 

The government offered to eliminate the export taxes on milk and increase subsidies for beef production. However, the talks didn't touch on the export taxes on soy or corn, two major sticking points in relations between the government and farmers. Grains carry heavy export taxes, up to 35 percent in the case of soy, the country's top crop.

 

Farm groups are demanding the issue be addressed, but Giorgi said Tuesday that a reduction is not on the table right now.

 

In addition, farmers reacted angrily to the speculation of a government takeover of the grain trade.

 

The Confederation of Buenos Aires and La Pampa Rural Associations, or CARBAP, said in a statement late Thursday that such a plan was a repeat "of old recipes that didn't work."

 

Talk of the plan threatens to derail negotiations between the government and farmers which could lead to a repeat of last year's bruising conflict.

 

The farmers launched a series of strikes and roadblocks over four months last year to protest export taxes on grains, limits on grain and beef exports, and other government intervention in agricultural markets.

 

The strikes shut down shipments from Argentina, one of the world's leading grain exporters, and caused food shortages in the cities.

 

Rural Society President Hugo Biolcoti told local radio Friday: "I don't know if there will be a Tuesday" meeting. However, he noted that there are a few days remaining between now and the meeting and that the issue should be clarified by the government as soon as possible. "You can't make announcements through the newspapers," Biolcoti said.

 

In addition to the pressure on farmers to reach a quick agreement with the government, the speculation may also be designed to spur farmers to quickly sell soy stocks, which they have refused to sell.

 

The government is eager to collect the export taxes on the soy amid signs of a rapid economic slowdown, heavy stimulus spending and Argentina's lack of access to international lending markets. Analysts estimate that there are still between four million and nine million tonnes of soy still sitting in silos and plastic bags across the Pampas.

 

Many farmers have held on to their beans since last year, at first due to the strike, but later due to plunging international soy prices and the hope that a rebound is coming.