Argentina's Agro Strike: Bet on it Ending

....but also bet that the 18% extra soybeans that's reportedly being planted next year in the USA is offset by a reduction in acreage in Argentina.

The Klishtina government has played its rebate card, and in the eyes of the general public it looks like a good one. Basically, the small producers (farming 500 hectares or less) get around 80% of the recent tax hike back in tax rebates later. Or in other words, be good and pay us and we'll give you it back later.

This sounds fine on the surface, and this line of reasoning takes the wind out of the critics' sails in Buenos Aires. However, it's causing bigtime resentment amongst the small producer in the pampas because it's calculated that around 60% of the small producers farm "on the black" and don't pay taxes anyway. And as you might guess, it's tough to get a rebate when you don't file tax returns.

The upshot of all this is:

1. The strike will now peter out. Expect limited resistance pockets, but basically the agro sector will get back to the fields to harvest their now slightly overdue crops.
2. Farmers are likely to plant more corn and wheat next year, and less soybean.
3. Cristina is now deeply hated out there in the sticks.

As for my friend Lousteau, if this "concession" was planned all along, I've underestimated him. But I highly doubt it. This whole cock-up was started by him in the first place, and the fudged compromise has left a stain early on the early days of the Klishtina government. What's worse, Klishtina had to cancel a state visit to London because of all this mess, and she'll really have it in for the Finance dude for missing one of her beloved trips abroad. I still say Lousteau is bad for the country as he knows only too well that by kowtowing to his mistresses, the basic problem of the weak peso policy will just get worse. If an economist can't see economic reality, then woe betides us all.

Disclosure: no position in Argentina exposed agro stocks (BG covered on Monday)