The Andean nation is a small producer of soybeans compared to neighbours Brazil and Argentina, but output and exports of the oilseed have jumped in recent years due to improved crop yields and bigger plantings. Production should reach 2.4 million tonnes this year, of which about 80 per cent would be exported, industry groups say. Virtually all of that is GM varieties, which is why the “Pachamama” (or Mother Earth) law signed by Morales last month has rattled growers in the lowland east.

Morales, a former coca farmer, is a vocal advocate of organic farming methods and says the legislation is a means “to live in equilibrium and harmony with Mother Earth.” The law also calls for limits on the expansion of farming into new areas and assigns a spiritual value to land beyond its social and economic function.

Some industry figures say uncertainty over the new rules could affect farmers’ plans.

“It’s possible with this uncertainty that some people will avoid sowing or sow less using any non-GM seeds they can get hold of,” said Fernando Asturizaga of the Anapo farming association.

“We want them (government officials) to understand the potential consequences of the measures contained in the Mother Earth legislation and to make changes or clarifications either in the implementation of this law or through a new law.”

Soy exports brought in about $800 million last year, making the oilseed the country’s third-biggest foreign currency earner after minerals and natural gas.

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The seven-day protest could fuel supply concerns just as dry weather linked to the La Nińa weather pattern worsens the outlook for soy and corn production.

Argentine farmers have been at odds with the government for years over export curbs aimed at taming double- digit inflation and guaranteeing affordable supplies of everyday staples.

They say a system of wheat and corn export quotas lets millers and exporters pay farmers low prices, and they demand that centre- left President Cristina Fernandez scrap the caps so they can enjoy high wheat prices as they harvest a bumper crop.

“We must improve and normalize grains trade in Argentina, especially for wheat and corn. Farmers lose fortunes and consumers have to pay more for their daily bread,” said Eduardo Buzzi, head of the Argentine Agrarian Federation, one of the four farm groups leading the strike.

Buzzi said government policies only serve to benefit multinational companies such as Cargill and Louis Dreyfus.

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In the rambling pens at Buenos Aires’ main cattle market, traders say the recent rise in prices was long overdue and could stop even more farmers selling off their herds to use their land for more profitable crops, such as soybeans.

“Ranchers were getting very low prices and that drove many of them to sell off their herds,” said Sergio Terrani, a cattle broker at the Liniers market, adding that a prolonged drought had forced many to run down their herds.

“They couldn’t afford to buy rolls (of hay) with prices so depressed, so a lot of farmers decided to sell,” he added.

But recent rains have rejuvenated the grazing pastures of Argentina’s legendary Pampas plains, encouraging ranchers to fatten up their animals instead of sending them to market.

The current slowdown in slaughter rates should eventually boost supplies, but for now it means fewer animals are being sent to market and average prices have risen 16 per cent in the last two months at Liniers. Local media are reporting increases at butchers’ counters of about 40 per cent.

Higher prices are good news for ranchers, Agriculture Minister Julian Dominguez said this week, but some analysts fear a renewed crackdown by the government’s price watchdog, Domestic Commerce Secretary Guillermo Moreno.

“There’s optimism over the prices, but it’s cautious optimism because ranchers fear the government won’t stand for this level of increase,” said independent beef industry analyst Belisario Castillo.

So far this year, 132,242 animals have been sent to Liniers, down 20 per cent from the same per iod last year. Beef export volumes surged more than 57 per cent in 2009, partly reflecting farmers’ decision to send cattle to slaughter.

Some industry analysts say delays in subsidy payments to feedlots late last year have also disrupted the flow of livestock to market.

TOUCHY SUBJECT

Rising beef prices are a touchy subject in Argentina, where a barbecue is considered a birthright, and the government closely monitors the cost of the meat to keep consumers happy.

“Anything that happens with beef prices is news here. Historically, beef has destabilized presidents,” said a source in the meat-packing industry, who asked not be named.

The world’s biggest beef eaters, the average Argentine ate more than 73 kilograms (161 pounds) of it last year, the highest rate for 15 years, according to the latest data by the meat industry group CICCRA. That compares with about 43 kgs in the United States.

And beef weighs heavily in Argentina’s inflation index.

Despite a sharp slowdown in Lat in Amer ica’s No. 3 economy last year, inflation remained stubbornly high and food prices rose 1.6 per cent in December, according to official data. Private surveys put real inflation much higher.

The government’s Moreno keeps a close eye on prices and meets meat industry leaders every Friday. Any sign that demand is outstripping supply results in a slowdown on export licences granted by the state-run ONCCA farm trade agency, industry sources say.

“This government’s beef policy is first supply the domestic market, then if there’s anything left, export,” said the meat-packing industry source.

Argentine farmers have been at odds with the government over farm policy for years and they staged strikes and roadblocks in 2008 when the government hiked soy export levies. Officials defend such measures as a way to redistribute the nation’s farming riches.

REJUVENATE

Some analysts say higher prices could help rejuvenate the ranching industry and stem a trend of ranching pastures being turned over to soy – Argentina’s top crop.

“From now on ranching’s going to be an option again,” said Raul Milano, executive director of the Rosgan televised cattle market run by Rosario grains exchange.

“It’s come too late for thousands of farmers who’ve already lost their herds, but we predict a promising outlook for the coming years,” he said in a statement.

At Liniers, it seems like business as usual. Workers on horseback herd cattle into pens as traders gather for auctions, but many fear a return to the tense times of recent years when government officials patrolled the market in person.

“From 2006 onward, when the intervention started, the amount of cattle on sale started to fall sharply,” said Jorge Longobuco, Liniers operations manager, adding that repeated price controls had eroded the market’s traditional role.

“If there’s less supply, the buyers will pay a bit more to get hold of the goods … the only thing that intervening in the market does is cause distortion,” he said.

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Argentina, a leading global wheat exporter and Brazil’s key supplier of the grain, has restricted shipments in recent years to guarantee domestic supplies and tame rising prices for staples like bread and pasta.

Farmers say export curbs depress the price they get for wheat as exporters withdraw from the market, making it an unprofitable crop and forcing them to turn their land over to soybeans instead.

“When you’ve got wheat to sell, there’s no one to buy it and there’s no one who wants to pay the full (international) price,” said Mario Llambias, head of the Argentine Rural Confederation (CRA), one of the country’s four main farming associations.

“There’s no market and no buyers. Why? Because the exporters have withdrawn from the market,” he told reporters during a meeting of farmers in Buenos Aires.

Anger over the wheat market has fuelled farmers’ opposition to government agricultural policy and some hardline leaders have called in recent weeks for fresh protests against the government of President Cristina Fernandez.

Farmers halted sales of grains and livestock repeatedly in 2008 and 2009 to protest at export taxes on farm goods such as soybeans, Argentina’s No. 1 export earner. They have also been angered by export curbs on beef, corn and wheat.

EXPORTS

Eduardo Buzzi, head of the Argentine Agrarian Federation, said farmers still wanted a cut to export taxes, but that a government move to normalize wheat prices would be seen as a positive sign.

“If they free up exports that would help decongest (the wheat market). This would be an answer, although not the only one,” he said.

“If this isn’t resolved, this is going to be a year of tension and conflict,” he said, adding that farm leaders were “trying to avoid protest measures.”

Argentine farmers are close to concluding the 2009-10 wheat harvest and the Buenos Aires Grains Exchange estimates production at 7.5 million tonnes, the smallest in more than 30 years, according to official data.

However, that still leaves a surplus for export after domestic demand of about six million tonnes has been met. Just over 647,000 tonnes of new-crop wheat have already been shipped abroad, Agriculture Ministry figures show.

The U. S. Department of Agriculture (USDA) estimated the crop at eight million tonnes Jan. 12.

Fernandez defended government intervention in agricultural markets on Monday as she announced a subsidized loan program for small-scale wheat farmers.

She said the 180-day loans meant growers would be able to hold on to their crop until prices rose.

“This shows the state intervening in the market to help sustain prices … to counter those theories that say state intervention always ends up harming farmers,” Fernandez said.

Dutch Watchdog Suspects Flour Sector Cartel

The Dutch competition authority said Jan. 14 it was investigating several companies in the flour industry due to a suspected cartel in the sector.

The NMa said it had made reports on a group of companies at the end of last year after thorough investigation, and said similar action was being taken by counterparts in Germany, Italy and Belgium.

“Everyone eats bread, pasta or other flour products daily. This sort of cartel dupes all Dutch people because they can’t pay a fair price for their staple food,” said Pieter Kalbfleisch, chairman of the NMa, in a statement.

It said the flour industry would be a focus for investigation in the 2010-11 period.

In December, two German flour mills were searched by officials from Germany’s federal cartel agency in an investigation into alleged anti-competitive behaviour.

They were looking into allegations that mills involved in processing of hard durum wheat for production of semolina were in agreements to share customers, set market share quotas and agree prices dating back to 2003.

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“Whenever an important market changes the rules it affects us.”

– HUGO PASTORE

Argentina has scrapped tax breaks on soybean imports to promote the use of Argentine beans in crushing plants, but industry analysts say the measure could aggravate tight supplies.

Argentina, the world’s top supplier of soyoil and soymeal, is also the No. 3 exporter of unprocessed soy. But repeated strikes by farmers in the last year have led crushers to import beans to keep plants operating at full capacity.

In a resolution published in the official gazette, the government said it was scrapping export tax exemptions on soymeal and soyoil made from imported beans in order to “protect farmers’ incomes.

“The use of domestic raw materials should be privileged,” the resolution said.

The measure is seen as a government effort to pressure Argentine farmers to sell millions of tonnes of old harvest beans they have been hoarding. This should ease pressure on the peso by boosting dollar flows.

“What the government’s trying to do is take a chunk of crushers’ supplies to force

them to go out more aggressively in the local market to get people to sell soy,” said Enrique Erize, an analyst at the Novitas consulting firm.

He said the step could worsen the impact of the drought-hit harvest on crushing activity by taking away another source of feedstock.

Farmers, already gathering 2008-09 soy, have been stashing 2007-08 beans in the hope of higher prices or a cut to the soy export taxes that have fuelled their bitter year-long dispute with centre-left President Cristina Fernandez.

Rosario grains exchange recently estimated that

farmers were hoarding some five million tonnes from the previous harvest, far more than they normally have left at this time of the year. Erize put the figure at about 4.5 million tonnes.

Paraguay, the world’s No. 4 soy supplier, exports between 1.5 million and 2.0 million tonnes to Argentina a year – still a relatively small quantity.

Whereas Argentina is expected to gather between 39 million and 43 million tonnes of 2008-09 soy, Paraguay’s harvest is estimated at about four million tonnes.

Paraguayan oilseed exporters reacted cautiously, saying they wanted more details of the measure in order to assess its impact. Soy is the country’s top export earner.

“Whenever an important market changes the rules it affects us,” said Hugo Pastore, head of Noble Paraguay, which exports to Argentina. “We need to know how far the measure goes … and to see what the Foreign Ministry says.”

Argentina’s year-long dispute over soy export taxes has seen increased use of Paraguayan soy by Argentine crushers. Some beans are also imported from Bolivia and southern Brazil.

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Argentina’s last wheat harvest was the smallest since 1982 due to a harsh drought, compounding farmers’ reluctance to plant wheat after two years of government price controls and export restrictions aimed at taming rising food prices.

Global wheat prices have plunged 40 per cent in the last year and that will make the crop even less appealing.

“The big carrot of high prices isn’t there so I think the government meddling may play a bigger role in people’s steering away from wheat,” said Sean Cameron, a farmer from Buenos Aires province who heads the AAPROTRIGO wheat association.

“It would be a great achievement if we managed to plant the same as last year (2008-09), particularly because the land is generally dry,” he said.

Some of the driest areas are in Buenos Aires, which accounts for half the country’s wheat production.

The acute drought that cut Argentina’s last harvest by almost 50 per cent to 8.3 million tonnes has lingered on in many areas as farmers decide how many fields to earmark for wheat.

Last season, sowing area fell by 22 per cent to 4.67 million hectares (11.5 million acres) – the smallest since 1992-93, according to Agriculture Secretariat figures.

That deepened a trend of lower wheat planting in recent crop years in Argentina, historically a top five wheat exporter.

MEAGRE HARVEST

The meagre 2008-09 harvest means farmers have less money to buy seeds and fertilizers for the new wheat season and industry analysts say farmers are suffering a lack of bank credit caused by the global financial crisis.

“Farmers have very little ready cash,” said Fernando Vuelta, an analyst at the FYO brokerage in Argentina’s main grains port Rosario. “We’re going to see a drastic reduction.”

Pablo Adreani, of Buenos Airesbased consulting firm AgriPAC, said a 10 per cent fall in wheat area was possible, especially if rains remain elusive in the coming days.

“Every week that passes without rain could see wheat area fall four or five per cent,” he said, adding that ideal weather might produce a 10 per cent increase despite political uncertainty ahead of mid-term elections on June 28.

The vote is seen as a big test for President Cristina Fernandez, who has been locked in a bitter standoff with farmers for more than a year. Her popularity rankings have fallen and farm leaders hope the ballot could usher in change.

They are backing an opposition bill to cut the grains export taxes at the heart of the row and ruling party losses in the polls would improve the bill’s chance of becoming law.

EXPORT TAXES

Fernandez announced cuts to wheat export levies in December, lowering the burden to 23 per cent from 28 per cent, but some analysts say a bigger reduction is the only way to prevent a shrinking wheat area.

“A simple costs versus benefits analysis shows wheat is far from being a viable option for farmers,” Rosario grains exchange said last week in a report.

Revenue from grains export taxes has become even more important for the centre-left government as the economy grinds to a halt.

The 2008-09 harvest turned out to be even worse than the most pessimistic forecasts, but it was the weather that proved the most significant factor despite farmers’ gloom over the farming conflict and government controls on trade.

With parched fields causing alarm in important wheat-farming regions, the weather may again determine area.

“Southwestern Buenos Aires and southern parts of La Pampa (province) are very bad and they’ll probably cut back on sowing,” said weather specialist German Heinzenknecht of the private Applied Climatology Consultancy.

“Some places have improved a but, but others are a long way from having the moisture levels needed for seeding,” he added.

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Early this year, things looked rosy for beef exporters in Argentina, Uruguay and Paraguay, but with Russian importers struggling to get credit and Europeans cutting down on expensive steaks, sales have stalled and prices have fallen.

Demand “is almost zero, there are virtually no deals being done because they’re not ordering,” said Fernando Herrera, president of Argentina’s Association of Beef Producers and Exporters, or APEA.

Major export

Some Argentine firms had been forced to renegotiate previously agreed prices and even sell unwanted containers off at low prices amid a slump in Russian purchases, he said.

Demand has also slowed from the European Union, meaning the highest-quality filet mignon intended for export is being sold for less at Argentine supermarkets, he added.

Industry leaders in the southern cone say export prices have fallen by as much as 25 per cent since October, and few expect an imminent recovery, especially from Russia – a key market for all three South American neighbours.

Uruguay and Paraguay’s beef exports are still at record levels for the year, but October’s downturn is causing alarm because of the importance of beef in their small economies.

Paraguay’s Beef Chamber (CPC) says October’s sales abroad have fallen between 45 and 50 per cent due to an almost total lack of interest from Russia and Chile, which account for 80 per cent of the country’s exports.

“The most worrying thing is that it seems people have stopped eating beef,” said Maris Llorens, president of the Frigomerc meat plant.

“The outlook for 2009 looks pretty uncertain to me, we’re just praying that they finish up whatever stocks they have left and start buying again,” she told Reuters in Asuncion.

Meat plants were closing down for weeks at a time or giving workers holidays to avoid job losses, she said.

A similar situation is being played out in Argentina, the world’s No. 4 beef exporter, although some trade union leaders have blamed the slowdown on government export controls aimed at taming rising beef prices in the local market.

Argentina’s sluggish exports in recent years have been good news for its small neighbour, Uruguay, whose beef exports have surged 55 per cent in the first 10 months of the year to a record of nearly $1.1 billion (all figures US$).

Uruguay’s sales volume rose slightly in October, but prices fell about 13 per cent and will likely slip further this month, industry analysts say.

“Suddenly gone”

Russia, Uruguay’s top buyer, cut its imports to $9.3 million

last month – less than half what it spent in August, according to the National Beef Institute, or INAC.

“Russia is generally very volatile in terms of demand… while it lasted the prices were excellent, and now it’s suddenly gone,” said Rafael Tardaguila of Montevideo-based agricultural consulting firm, Blasina and Tardaguila.

“At the moment, there’s no sign that this near deadlock in the international market is going to come to an end,” he said.

Brazil, the world’s top beef supplier, has also seen sales to Russia fall.

Russian shipments dropped 42 per cent last month, according to the Agriculture Ministry, but Brazilian exporters are less dependent on Russia than their counterparts in neighbouring countries.

At Argentina’s biggest cattle market, prices have fallen steadily in recent weeks because meat plants are stocked.

An unexpected result of the fall in export demand has been lower steak prices at butcher shops in Argentina, where the government has angered ranchers with export curbs and price controls to drive down the cost of the nation’s favourite food.

“The objective of lower domestic prices has been achieved – not for a good reason but because of the collapse in world demand,” Herrera said.

– Additional reporting for Reuters by Conrado Hornos in Montevideo, Mariel Cristaldo in Asuncion and Roberto Samora in Sao Paulo

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“…any crop that is planted uniformly across large areas with the use of herbicides deprives bees of the flowers they need.”

– Alicia Basilio, School of Agronomy, University of Buenos Aires

Beekeepers had it easy when cattle roamed freely across the flower-filled meadows of Argentina’s Pampas plains. But a boom in soy farming has changed all that.

The legendry prairies have fast become one of the most efficient swathes of cropland on Earth, leaving little room for wildflowers – and leading beekeepers in the world’s No. 1 honey exporter to move their hives and even sow their own flowers.

“They say that wherever the cow goes, the bee follows… They live in harmony and both benefit from flowers. But things have changed,” said Patricio Crespo, a vet and beekeeper from Chivilcoy, a typical Pampas town some 160 km west of Buenos Aires.

“It’s a shame and it’s sad, not just for beekeepers,” he added.

Fields of soybeans, corn and wheat have spread across the fertile plains in recent years due to soaring global demand for food and biofuels.

Some ranchers and dairy farmers have moved their herds to distant provinces where soybeans do not flourish, and more and more animals are being reared in feedlots, freeing up valuable arable land for crops wherever possible.

Chivilcoy has seen a sharp reduction in its grazing area, alarming the district’s 300 beekeepers, who are battling falling honey production – a picture played out across the region as wildflowers become scarcer.

Flowers provide bees with the nectar and pollen they need to feed and make honey, and a variety of species keeps them supplied for many months.

“Nowadays, the profits aren’t what they used to be and there are virtually no fields left that aren’t used for farming,” Crespo said, adding that 13 per cent more land around Chivilcoy would be planted with soy this season.

Prosperity

The arrival of genetically modified soy and surging demand from China has seen Argentina’s production of the oilseed more than doubled within 10 years, catapulting the farming industry out of a decades-long decline.

Argentina is the world’s No. 3 soy exporter behind the U. S. and Brazil and the crop accounts for nearly a quarter of total export earnings.

It has brought new prosperity to the sleepy towns of the Pampas and played an important role in the country’s recovery from an economic crisis in 2001-02. But for beekeepers, it means industrialized farming that conspires against them.

“One of the characteristics of Argentina was that you didn’t have to invest much to get good production, especially in the Pampas because of the meadows, prairies and the low-key agriculture before soy burst on the scene,” said Lucas Martinez, president of the Argentine Beekeepers Society.

The average beehive, he said, used to produce up to 60 kg of honey per year, but yields have fallen to a third of that in many places, meaning beekeepers need more colonies to maintain production.

Conflicts occasionally flare as beekeepers compete for the most blowery spots. Several provinces famous for their citrus and apple orchards have started charging beekeepers who travel to the regions with their hives during the blossoming season.

Herbicides

Argentine beekeepers have not had to contend with the mysterious mass bee deaths seen in the U. S., which scientists say may have been caused by disease.

Modern farming methods are also blamed for falling bee populations in Europe and North America, a trend that could eventually harm the supply of food crops that rely on them for pollination.

In Argentina, beekeepers think falling hive productivity is linked to the crop boom, although either very dry or wet weather has particularly hit output in the last two years.

“Soy, the soy takeover as we call it, is the biggest problem, but actually any crop that is planted uniformly across large areas with the use of herbicides deprives bees of the flowers they need,” said Alicia Basilio from the University of Buenos Aires’ School of Agronomy.

“The biodiversity that’s essential for bees is in decline due to the advance of this crop,” she said, sitting before the half-dozen white beehives that make up the university apiary.

But honey connoisseurs in Argentina, which the Agriculture Secretariat says accounts for 25 per cent of world honey exports, say the shift to far-flung regions is producing unusual honeys from native plants and organic products.

“The changes in Argentine beekeeping are tremendous and happening very quickly,” said Beatriz Achaval, who helped develop a 10-year national beekeeping plan that seeks to promote the country’s increasingly diverse honeys.

Honey exports brought in some US$134 million in 2007, a tiny sum compared with multibillion earnings from grains sales.

Global honey prices have risen in recent years, partly due to supply shortages. Argentine exports slid by more than 20 per cent last year in terms of volume.

In Chivilcoy, Crespo has sown traditional meadow plants such as pink and white clover and purple-flowered alfalfa that were once plentiful. He remains optimistic about the industry’s future despite the challenges.

“Honey continues to be very much valued in the world (and) beekeepers have a great capacity to adapt, they’re very creative,” he said.

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