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Argentine Farm Strike Means Lengthy Lunches for Grain Traders
Bloomberg
May 14, 2008

By Matthew Craze

May 14 (Bloomberg) -- A nationwide strike by farmers in Argentina has left traders at the nation's biggest agricultural exchanges with little or nothing to do.

Trading at the Buenos Aires Cereals Exchange and the Rosario Board of Trade has been at a near standstill since farmers began withholding crops and blocking grain trucks on May 7, the second protest since March against higher export taxes.

``It's so unpredictable that you don't know what to do next,'' said Cesar Gagliardo, president of Buenos Aires grains brokerage Artegran SA. ``There's nothing else to do but to take long lunches.''

The wait may continue beyond May 15, when leaders of farm groups will meet to decide whether to extend their protests. A prolonged disruption in crop shipments may boost global grain prices and damage Argentina's earnings from exports, more than half of which come from agricultural products.

Argentina is the world's third-largest soybean exporter and the biggest shipper of vegetable oil made from the crop. The South American country is the second-largest exporter of corn, and fourth in wheat. All those farm products have risen to records this year.

Former economy minister Martin Lousteau introduced a variable export tax that levies soybeans and sunflower seeds at more than 40 percent, depending on prices, to replace a fixed tax rate of 35 percent.

Lousteau resigned April 24 after the first strike caused food shortages, halted grain exports and provoked the biggest challenge to President Cristina Fernandez's five-month-old government. Farmers suspended protests for a month before restoring blockades after talks with the government collapsed.

Trading Plunges

Yesterday, 300 metric tons of soybeans were traded on the electronic platform of the Buenos Aires Terminal Market, or MatBA, compared with a seasonal daily average of 100,000 tons, Juan Politti, the exchange's operations manager, said in a telephone interview. No trades took place on May 12 and May 9.

In the empty trading hall of the exchange, which the MatBA shares with the Buenos Aires Cereals Exchange, prices for soymeal and other products written in chalk on blackboards near electronic wall monitors haven't been updated since May 6. Together, the exchanges trade about 45 million metric tons of cereals and oilseeds a year, almost half of the country's output.

``Today people aren't selling their soybeans, because they don't know what will happen with the taxes,'' Luciano Miguens, head of the Rural Society, said during a meeting yesterday between farm-group leaders and opposition congressmen.

Withholding Crops

Farmers may be storing more than 30 million metric tons of soybeans in plastic silo bags on their land as they await a sign that the government may lower export taxes, Ricardo Baccarin, a trader at Panagricola SAFICI in Buenos Aires, said May 8.

About 67 percent of the corn crop had been harvested as of May 8, and 82 percent of the soybeans had been collected, according to the Buenos Aires Cereals Exchange.

Argentina's regional leaders stepped up efforts to bring farmers and the central government back to the negotiating table tomorrow, when the current strike is scheduled to end.

``I hope a solution can be found quickly,'' said Hector Campana, the deputy governor of Cordoba, Argentina's main soybean-growing province. ``This protest has already gone on too long and nobody is benefiting from it -- neither the farmers nor the government,'' he told reporters in Buenos Aires yesterday.

On the Rosario Board of Trade, which accounts for another 40 percent of Argentina's grains business, no trade has taken place since May 8, said Lorena d'Angelo, an analyst at the exchange.

``The operators aren't here, since the buyers aren't here,'' d'Angelo said in a telephone interview yesterday. ``I don't think it's going back to normal this Thursday.''

Blocking Trucks

Yesterday, only two trucks carrying grain arrived at Parana River ports, which handle more than 90 percent of the country's vegetable-oil exports. On the same day last year, 5,969 trucks delivered produce to the 19 ports, according to the Rosario Board of Trade.

Exporters, including Cargill Inc., the largest U.S. agricultural company, and Bunge Ltd., are using inventories at processing plants on the Parana River to meet deliveries to clients, said Alberto Rodriguez, president of the Argentine Vegetable Oil Chamber and Cereals Export Center, known as CIARA- CEC. Exporters also unload barges carrying soybeans from neighboring Paraguay, the world's fourth-largest exporter.

``The situation for each exporter is different, depending on their storage capacities,'' Rodriguez said in a telephone interview yesterday. ``But this situation is driving up freight costs, and that has us worried.''

Shipping Rates

The Baltic Dry Index, a measure of shipping costs for commodities, climbed to the highest since Nov. 21 yesterday on a lack of available vessels in the Atlantic. An end to the Argentine strike would boost the need for vessels as cargoes arrive at port.

Shipbrokers are ``still using caution'' sending vessels to be loaded with grains at ports on the Parana River, said Sinan Kurtul, a Scarsdale, New York-based broker at EKS International.

Gagliardo said traders, who buy grains from farmers and sell them to companies such as Cargill and Bunge, are suffering along with sellers of agricultural equipment and other service providers as the strike continues.

``People who make a living off of this commercial chain are paralyzed,'' Gagliardo said. ``An urgent political decision is lacking to end this affair.''

To contact the reporter on this story: Matthew Craze in Buenos Aires at mcraze@bloomberg.net.

Last Updated: May 13, 2008 23:04 EDT