Huelga! Argentine Farmers Back on Strike

♠ Posted by Emmanuel in , at 5/10/2008 01:26:00 AM
Call it populism that isn't particularly, well, po-pu-lar. While India has decided to shut down futures trading of in-demand agricultural commodities to show the public it is "doing something" about the high prices of food at home, the Peronist government of Argentinian President Cristina Fernandez de Kirchner has raised export tariffs in a bid to keep the locals well-supplied with increasingly scarce agricultural produce. The problem is that the farmers whose livelihoods have been adversely affected by this tariff are none to happy, as are many middle class folks who Kirchner needs the support of. The decision to raise tariffs was accompanied by massive rioting in Argentina by affected farmers. As is usually the case in Argentina, large-scale disturbances ensued. In this instance, routes were cut off to neighbouring countries which are usually destinations of Argentinean produce until the elevated tariffs were put into effect. If you want more of a background, consult this TIME article, from which I draw the snippet below:

At the core of the discontent was a decision by Fernandez three weeks ago to raise export taxes for soy from 35% to 44% though a sliding scale of tariffs. Other observers have called the soy tax and efforts to ban exports of some farm products as misguided attempts to retain the supply of basic goods in Argentina. The government's argument is that the large-scale export of products like soy cause local shortages and drive up the price of food in Argentina.

The protesting farmers (the organizers claim as many as 150,000 took part) blocked international routes used for trade with neighboring Brazil, Paraguay and Chile, leading the government to threaten police action to clear the roads if necessary. The strike forced many supermarkets and butchers to close their meat counters, a dramatic move in a land famous for its abundant and tasty beef. Fruit and vegetable prices rose and exports of cereals and oils have also been affected.

A 30-day truce ended at the start of the month. With more than half of all export revenues coming from agricultural exports which are now at a standstill, things aren't looking up for Argentina's economy. The main agricultural producers in the country want nothing less than the removal of the additional tariffs, but Kirchner won't back down from the redistributive ploy. The result is that the farmers have gone back to good ol' "industrial action," as per the British euphemism. From Reuters:

Thousands of farmers lined Argentina's highways on Thursday in fresh protests to disrupt key grains exports and pressure the government to cut agricultural taxes. Farmers launched the eight-day strike after breaking off weeks of talks with the government, complaining that President Cristina Fernandez had refused to modify a new system of export taxes that triggered a three-week strike in March.

"They wanted to trample all over us, but they couldn't do it," said Alfredo De Angeli, a farm leader in Entre Rios province who became well-known for his fiery speeches during the first strike. The Entre Rios town of Gualeguaychu, some 125 miles (200 km) from Buenos Aires, has become the focus of farm protests. Argentina is one of the world's top suppliers of corn, wheat and soy, and the protests have pushed up soy prices on world markets.

Argentina's peso currency slipped as investors concerned over a prolonged conflict sought refuge in dollars [!], and the local currency is now languishing close to a five-year low. Bonds and stocks were also jittery.

Traders at Argentina's main grains market in Rosario said they had no orders. Farmers plan to hold back products from soy crushers and exporters through May 15. But they have ruled out a repeat of the roadblocks that caused food shortages during March's strike, when the government accused them of trying to hurt ordinary Argentines.

Fernandez's leftist government has offered a tax rebate and transportation subsidies for small producers to cushion the effect of the new taxes, but farmers said they will not go back to negotiations unless she suspends the measure. The sliding-scale tax system pins export taxes to international prices, raising levies on soybeans to about 40 percent at current prices from the previous fixed rate of 35 percent. "When they don't have any more cash from exports, that's when they'll have to sit down to talk," said one farmer in Gualeguaychu who declined to give his name.

Argentina's vast fertile farmlands make it the world's No. 2 corn exporter, the third-biggest soy supplier and the No. 4 provider of wheat and beef. The conflict with the farming community has landed Fernandez with her biggest challenge since taking office five months ago. Top officials criticized the new wave of protests. "It's a hugely irresponsible decision that makes no sense at all. It's just about defending the interests of one sector and not about the general interest," said Interior Minister Florencio Randazzo.

Fernandez has refused to scrap the sliding-scale tax system and she defends high export taxes on farm goods as a way to redistribute wealth and combat inflation in a country where a quarter of the population lives in poverty. Soy exports earned the country $13.47 billion last year while sales of farm goods abroad accounted for 52 percent of total Argentine exports, totaling $29.13 billion.

What are these farmer doing with all that agricultural produce in the meantime now that they are unwilling to cooperate? Socialists would say they are "hoarding"; these farmers would say they are "protecting their interests." Mercopress has an interesting article on how farmers are using ginormous silos to keep the non-exported grains away from unwelcome parties. Will they succeed in starving the government of revenues from export tariffs? It will be interesting to watch, to say the least:

The extended Argentine farmers/government conflict, which was triggered in early March when the new sliding export taxes system was announced, and its renewed eight days of protest, have left an estimated 44 million tons of grains and oil seeds unsold, valued in approximately 12 billion US dollars, according to market analysts interviewed by the Buenos Aires press. The 44 million unsold tons are equivalent to 45% of the 2007/08 harvest which is forecasted to be Argentina’s second record with 96.8 million tons equivalent to 25 billion US dollars.

Non exported grains will inevitably have an impact for the Argentine government coffers since it will have limited access to collecting the controversial export tax if farmers hold on to their crops. This is particularly true since farmers apparently with the help of plastic silos can store such huge volumes of grains.

According to Gustavo Lopez from Agritrend, of the 44 million tons, 75% is soy. Argentina still has to ship overseas an estimated 32 million tons of soy, (some of it already sold but with no price agreed) which at current local prices is equivalent to 9 billion US dollars. The country’s total soy crop is expected to reach 48 million tons of which 14 million still are waiting to be harvested.

Ricardo Baccarin from Panagricola argues that given the current uncertainty in the grains market, and situation, farmers are holding on to their soy crops “which is the most valuable.They’ve decided to sell what they need to face current expenditures and the rest they are holding on to; we could be facing a historic year in so far as crop retention is concerned”, added Baccarin.

Normally at this time of the year daily transactions in the area of Rosario (Argentina’s main soy bean hub) “are in the range of 100 to 200.000 tons of soy, but currently it’s down to 10 to 30.000 tons”. Lopez revealed that an estimated 51 million tons of the current crop have been commercialized, and even when soy beans retention is as high as 75%, “most of corn and wheat has been traded. Of the 16 million tons of wheat possibly 4.2 million tons remain unsold”.

Regarding corn, of a crop of 21 million tons, 10.4 million tons have been traded and exporters have registered sales for 10.7 million tons. Argentina’s domestic consumption is 7.8 million tons. Nevertheless grain traders are fearful because last year the Kirchner administration clamped exports when the overseas registry reached 10.5 million tons. Lopez says that 25 million tons, (14 million of soy and 11 million of corn, sorghum and others) still have to be harvested.

And how do farmers store such huge volumes? Apparently plastic portable silos with minimum units of 200 tons and which can stand a whole year has become the most common resource in current circumstances. “The plastic silos are a good strategy for tough moments and uncertainty” said representatives from a company which specializes in selling these products. Apparently business has been booming and sales of plastic silos could store well above 40 million tons. “That’s where most of the crop should be now”, added Lopez.

This also means a huge improvement from the 2003/04 harvest when plastic silos helped store 12 million tons. Companies admitted this has become a “90 million US dollars business per crop”. Provincial authorities’ sources from Cordoba estimated that Argentine farmers could be holding on to grains and oil seeds valued at almost 20 billion US dollars [!]