Argentine Agro Strike Resumes in Full Throttle

The Argentina farmers' strike is back on. The agro boys sat down with the government boys on Friday after Klishtina gave it the "for the good of the country we must talk" bit, but after five or six hours, where agro said, “what if we do this?" and the government said "that's impossible", then agro said "well what about this, then?" and the government said "that's impossible" etc., etc., the agro guys got a bit cheesed off and calmly left the room. The next day's 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 the government and agro resume today, and according to Argentina's fairest mainstream newspaper the two sides are moving on the following agenda:

Government 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 government 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, because.......

Otto says:

The government 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 government are nothing new, and were on the table before the strike was called. Looks like they make the government wish list just to try and pad it out a bit.

As for the agro boys, there's nothing surprising there. The "allow us to export more filet mignon" line is there to be conceded, because the Cuota Hilton system isn't going to change overnight just because 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 boys 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 today'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, because that would be nitro+glycerine

Disclosure: At time of writing, author is short Bunge (BG). This may change at any moment, as it is a short-term trading position.

Comments

[FarmGirl]

Solidarity with the small producers, that's the whole point of the protest. These taxes are a coup de grace for small farmers (and some medium ones too). The government insists on measuring all producers with the same tax-stick, and that won't fly. You can't treat Monsanto like you treat some guy who has 300 hectars in so-so land, but that's what they are doing, and they refuse to back down. Also, this government has lost credibility with small producers, and they are suspicious about taking the bait of some subsidy or rebate they feel might never materialize. I am very worried about the possible outcomes of this. Keep the info coming.

[Jake2]

"So what to make of it Otto?" Nice piece but some broader conclusions/implicatio... for the ROW would be nice. I.e., if the farmers are on strike in Argentina, buy hog bellies, or something like that.