The Argentine government has rejected demands that it change controversial agricultural export tariffs which have helped push up world soy prices 10% and brought thousands of demonstrators on to the streets of Buenos Aires. Farmers are revolting over a new sliding-scale increase in export taxes. Soybean taxes are being hiked from 35 percent to 45 percent, with smaller increases on corn and other farm products.

Protests by farmers and their supporters last week night followed an uncompromising speech by President Cristina Fernández defending the new sliding scale of export tariffs on grains and cereals, which she called “profound measures to redistribute income”. Groups loyal to the government also took to the streets and there were isolated clashes.

Farmers, who say their total tax burden adds up to 73%, feel they are being unfairly squeezed. Two weeks of protests have blocked roads and ports in the north of the country. Apoundserto Rodríguez, head of the Argentine Vegetable Oil Chamber and the Cereals Export Centre, said only about 30 trucks were arriving at the main export port of Rosario, compared with 6,000 usually. “There are 2.2 million tonnes of grains and oils that have not been able to load,” he said.

The protest across the agricultural heartlands left queues of trucks laden with produce stranded for miles and has caused many exporters to declare force majeure. With Argentina on the sidelines of the export market, large consumers such as China are likely to turn increasingly to the United States for soybeans.

The Argentine government, which says the windfall from high commodities prices must be shared, has branded the protest “extortion”. The economy minister, Martín Lousteau, said there was “absolutely nothing new to warrant changing” the tariff regime. Argentina’s economy is back on track -- and agriculture remains one of its most profitable sectors. It is only fair that farmers and ranchers be taxed on more of that wealth, according to Lousteau, who announced the controversial tax overhaul on March 11.

The Census Bureau last week pegged the February crush at 3.98 million tonnes. While this was largely in line with and the trade’s expectations, other aspects of the crush report were not. Soybean oil stocks at the end of February dropped to 1.41 million tonnes, up slightly from the previous month’s 1.39 million tonnes.

The oil yield for February of 11.52 pounds per bushel was as expected, but the upward revision in January from 11.52 to 11.56 pounds looks out of line. The Census Bureau’s meal yield dropped in February and was revised lower for January, which looks more in line with the NOPA yields and the total oil and meal that can be extracted from a bushel of soybeans.

USDA has cut its forecast of soyoil for biodiesel (soy-methyl ester) to 1.27 million tonnes in 2007-08 (October/September), down by 272,000 tonnes as compared to the February estimate and equal to use in 2006-07. Rising soyoil prices discourage its use as a biofuel feedstock, USDA said. Soyoil exports are now put at 1.09 million tonnes, up from 885,000 tonnes estimated in February and also higher than the 853,000 tonnes seen in 2006-07.

The soyoil production forecast was also raised slightly to 9.61 million tonnes against 9.53 million tonnes in February and up on the 9.29 million tonnes in 2006-07. As a result, ending stocks rose to 1.29 million tonnes, compared with 1.13 million tonnes in February and 1.32 million tonnes in 2006-07.

The Thai Feed Association (TFA) has requested that the Thai government should stop collecting import tariffs on soymeal permanently, not for only one year. The problems caused by steeply rising prices led Pornsilp Patcharintanakul, president of the Thai Animal Feed Association, to make his request. The TFA believes that financial turmoil and price volatility are likely to continue to exacerbate soymeal producers, dealers and buyers’ problems. Thailand’s annual imports of soymeal total between 2.1 million and 2.5 million tonnes.

The soy complex closed lower on March 27. The old-crop/new-crop inverse has widened 50 cents since March 26 as concerns about tight old-crop stocks heighten as the Argentine farmer strike shifts export business to the United States that the old-crop balance sheet cannot accommodate unless USDA’s stocks report proves out that last year’s U.S. soybean crop was substantially understated. Crop insurance, rotation and fertilizer cost considerations appear to have resulted in more soybean acreage and less corn acreage that the net revenue calculations would have implied and now new-crop corn futures are battling against those factors. USDA’s stocks and acreage reports (due to be released on March 31) will provide important fundamental input as to whether the United States is headed to an intolerably tight old-crop soybean carryout and whether U.S. soybean acreage will rebound enough to allow U.S. stocks to rebuild in 2008-09. May bean futures closed down $9.09, finishing at $487.68; July lost $8.45, closing at $493.28; and August was down $10.29, ending at $487.95. May meal decreased $7.39 closing at $384.48; July was $7.72 lower, finishing at $388.01; and August meal closed down $10.47, ending at $381.95. May soyoil decreased $5.95 to finish at $1267.20; July was down $7.28, closing at $1283.08; and August was $7.05 lower, closing at $1289.25.

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