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3/30/08

SoyaWars!™ 2.0 What you need to know for the week in Argentina

The Argentina farmers' strike is back on. The agro boys sat down with the gov't boys Friday after Klishtina gave it the "good of the country we must talk" bit, but after five or six hours where agro said, "what if we do this?" and gov't said "that's impossible", then agro said "well what about this, then?" and gov't said "that's impossible" etc etc, the agro guys got a bit cheesed off and calmly left the room. Next days' vote among grass roots farmers to continue the strike and blockade took about a nanosecond to decide. Right now most roads are now blocked in the key Buenos Aires zone and no food trucks are getting to the capital.

Talks between gov't and agro resume Monday (mañana), and according to Argentina's fairest mainstream newspaper the two sides are moving on the following agenda:

Gov't Boys Position
  • No backing down on the export tax hike for fear of looking weak.
  • Possible rebate of between 5% and 8% for producers.
  • New organism called "Subsecretary of Family Agriculture and Rural Development" to look after the needs of the small farmer.
  • Credit lines at below market interest rates.
  • Possible subsidies on fleet transport and fertilizer prices.

Agro Boys Position
  • The gov't must back down on the export hike, and re-set the tax to pre-11th March level (eg 35% for soybeans)
  • Long-term plan to stimulate cattle ranching, as soybean farming has taken away grazing land and lowered production.
  • Allow more export of prime beef cuts
  • Allow more milk exports at world market prices.
  • Allow wheat exports to resume.
  • Gov't must recognize the difference between the issues of small scale and large scale farmers.
In a nutshell, these lists are about right. "So what to make of it, Otto?" I hear you all ask. Well, funny you should ask that, cos.......

Otto sez:
The gov't shouldn't worry about looking weak, because it already looks pretty debil to anyone with half a brain. Klishtina thinks backing down = weakness....pathetic, isn't it? The rebate idea may work, but it would depend on who is let in, what the conditions are etc. The other measures proposed by the gov't are nothing new, and were on the table before the strike was called. Looks like they make the gov't wish list just to try and pad it out a bit.

As for the agro boyz, there's nothing surprising there. The "allow us to export more filet mignon" line is there to be conceded, cos the Cuota Hilton system isn't going to change overnight cos of a few soya-related roadblocks. The difference between the lot of the small farmer dude and the big farmer dude is the whole point of all this. The agro boyz have to make it clear that this new tax hike is a bridge too far for the little guy, and they deserve a break.

So the scene is set for tomorrow's chat, then Klishtina is going to speak to the descamisados in a big Plaza de Mayo rally Tuesday, we hear. Meanwhile, word is that the farmworkers' protest rally (called off last Friday after Klishtina's more conciliatory-sounding Thursday afternoon speech) is back on for this week, and the gauchos will converge on the Plaza de Mayo too*. Expect plenty of posturing and crap, and don't expect Porteños to be eating much bread next weekend. The fun bit for traders will be watching how the ever more likely soybean supply crimp will play against the new stricter CBOT margin rule. My best reco on that is "keep it nimble".

*Hopefully not the same day, cos that would be nitro+glycerine