UPDATE 2-Argentine farmers freeze grain sales in protest

Mon Jan 17, 2011 8:46pm GMT

* Growers in leading exporter halt grains, soy sales

* Strike revives farm dispute that shook nation in 2008

* Trade expects muted impact due to pre-harvest timing

(Updates with grains market paralyzed, fresh Buzzi quote)

By Helen Popper

BUENOS AIRES, Jan 17 (Reuters) - Argentine farmers halted sales of wheat, corn and soy on Monday as they went on strike over export curbs, rekindling a dispute that helped drive global grains prices to record highs three years ago.

The seven-day protest by growers in the South American nation, one of the world's biggest food providers, could fuel supply concerns just as dry weather linked to the La Nina weather pattern worsens the outlook for soy and corn output.

Highways near the main grains hub of Rosario were unusually free of trucks on Monday morning after a busy weekend of hauling grains to crushing plants ahead of the strike, which was not expected to disrupt exports.

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, demanding that center-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 commodities exporters such as Cargill [CARG.UL] and Louis Dreyfus.

He added later that some farm leaders are already mulling further protests, though not necessarily another commercial strike, if the government does not reform its wheat policy.

"Continuing the protests over the coming weeks, until we get a definitive solution, has been discussed," Buzzi said in a statement.

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Factbox on Argentine farming [ID:nN16218722]

Argentine wheat graphic: link.reuters.com/pys48j

Argentine soy graphic: link.reuters.com/deg56p

Stories on Argentine crop weather [ID:nN29275354]

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This week's strike, which will last until midnight on Sunday, is bad news for Fernandez, just nine months before her widely expected bid for re-election.

The wave of farmer strikes that began in March 2008 over a tax increase on soy exports battered her popularity, hit Argentine asset prices and disrupted grains shipments at the height of the soy harvest.

The latest protest is not expected to rouse the same public interest or support as in 2008, and the impact on grain prices will likely be muted because harvesting has not yet begun.

Buzzi said farmers would not set up roadblocks as they did sporadically in 2008, sparking shortages of food and fuel, adding that the strike was largely symbolic.

WEATHER JITTERS

In Rosario-area ports, trade is generally light at this time of year and soy crushers and exporters increased purchases last week to build up stocks in anticipation of the strike.

The Rosario grains market will be open this week but traders said they would stay away to show support for farmers and trade was almost nonexistent on Monday.

Traders at the Chicago Board of Trade will likely be more concerned about the impact of parched conditions on Argentina's soy and corn crops than on the farmers' strike, although rains over the weekend brought relief to some areas. <0#S:>

Crop analysts have started to slash production forecasts for the grains -- to as little as 40 million tonnes in the case of soy from initial estimates for about 52 million tonnes.

Weather jitters have helped lift corn and soy prices in recent weeks close to their record highs of 2008. Soaring prices are good news for farmers, but the dry soils are worsening the mood across Argentina's famous Pampas plains.

Government officials condemned the farmers for calling another strike, even warning of possible flour shortages, although Agriculture Minister Julian Dominguez acknowledged wheat farmers' problems.

He advocated an even stronger state role in the country's multibillion-dollar grains trade, calling for the creation of a national grains board involving the state, grains exchanges and farming cooperatives.

(Additional reporting by Alejandro Lifschitz, Nicolas Misculin, Maximilian Heath and Maximiliano Rizzi, editing by Martin Golan)

((helen.popper@thomsonreuters.com; +54 11 4318 0655; Reuters Messaging: helen.popper.reuters.com@reuters.net))

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