Argentina-Proposals to market beef and grain.

ARGENTINA-MARKEING BEEF AND GRAIN.

Argentina is studying the creation of a new government entity to control the trade of grain and beef, allowing it to dominate the market, but stopping short of the full nationalization which the local press last week said was in the pipeline.

A source at the Production Ministry said that a full monopolization of farm trade was not planned, but that something similar to the plan outlined in local daily Pagina 12 over the weekend was being considered.

According to Pagina 12, officials at the Production Ministry said that the government was considering a plan to remove export taxes on grain and create a new trade agency to buy local crops and manage exports.

However, export ports and storage silos would remain independent. Traders would continue acting in the market ’buying raw materials to be processed and later exported with added value," Pagina 12 said.

A Production Ministry official told Pagina 12 that the new agency would be ’inspired by the entities...in Canada and Australia,’ with a focus on ensuring domestic supply and promoting domestic processing.

The Australian Wheat Board, of AWB, was privatized in 2001, but the government grants the AWB a near monopoly to make export sales.. The AWB has veto power over any other prospective exporter of wheat, effectively eliminating competition.

The AWB is designed to prevent Australian farmers from being played off against each other and taken advantage of by large buyers and traders.

The Canadian Wheat Board, or CWB, is governed by a 15-person Board of Directors, 10 elected by grain farmers and four appointed by the federal Minister of Agriculture.

The CWB is the mandatory marketing agent for non-feed wheat and barley grown in the central provinces, in effect a forced pooled selling system. On the other hand, the government also guarantees a minimum price for farmers.

In Argentina, talk of the new agency comes amid tense negotiations between the farmers and the government to avoid a repeat of last year"s crippling farm strikes.

There was speculation Friday that talk of a complete nationalization reported in local newspapers earlier in the day, was floated to pressure farmers into backing down from their demand for a reduction in soy export taxes before a key meeting with Production Minister Debora Giorgi on Tuesday.

Farmers quickly responded, flatly rejecting a move to nationalize the grain trade.

The Rural Society, one of the four leading farm groups, called the proposal ’a new attempt to muddy the playing field’ and ’prevent advances in the current talks.’ It said past attempts to centrally control grains trade had ’culminated in a series of complete failures, inefficiency and corruption.’

The Buenos Aires Cereals Exchange published a statement in leading papers over the weekend signed by all the regional exchanges, agricultural chambers and farm groups slamming the possibility of a nationalization of grain trade. ’The nationalization of grain trade will push society to the edge of another unnecessary conflict with unpredictable consequences,’ the statement said.

The tension created by the rumors of the new controls over grain trade and the response from the farm sector may complicate negotiation slated for Tuesday.

The statement published in the papers was ’an embarrassment,’ Justice Minister Anibal Fernandez told local radio.

This week"s meeting follows one held last Tuesday in which the government offered to eliminate export taxes on milk and increase subsidies for beef production but left the key issue of grains taxes as a sticking point. Those duties run as high as 35% for soybeans, the country"s top crop. The government says it will not yield on that issue.

The government is anxious to avoid a repeat of a series of crippling farm strikes over a four month period last year. The strikes shut down exports and caused food shortages in the cities. The prolonged conflict also cut deeply into president Cristina Fernandez"s approval ratings..