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Argentina: Farming crisis batters world food provider

The worst drought in 50 years, combined with a drop in soybean prices and unpopular tax policies, imperils a traditional beef exporter.

By Staff writer / August 12, 2009

San miguel del Monte, Argentina

If any place encapsulates Argentine pride it is the pampas, the plains that have yielded endless fields of corn and wheat and nourished cattle that produce some of the world's finest beef.

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But these days, the pastures are brown. The wheat won't grow. And the cows are dying.

Argentina is facing its worst farming crisis since becoming one of the most prolific food providers in the world. A devastating drought, the most severe in more than 50 years, has dried up grassland and left cattle with nothing to graze.

It comes amid a drop in soybean prices and unpopular tax policies on grains, beef, and milk that have squeezed farmers. This year, wheat planting is the lowest in 100 years. Some estimate that Argentina, whose meat-loving citizens each consume about 70 kilos (154 pounds) of beef a year, could become a net importer by next year.

"The image of Argentina as a world provider of food is being battered," says Ernesto Ambrosetti, chief economist at the Institute for Economic Research at the Argentine Rural Society.

European immigrants in the 1800s transformed Argentina's countryside, creating vast estancias, or country estates, where cattle were raised and grains cultivated – turning the nation into a key international producer. Today, the agricultural sector comprises about 9.5 percent of Argentina's gross domestic product and more than half of its foreign exchange.

A rift between farmers and the government began under populist president Juan Perón, who was elected in 1946. "The government pictured the agricultural sector as dominated by very rich people, against the interests of the poor," says Sergio Lence, an Argentine economics professor at Iowa State Uni­versity.

That attitude has sharpened in recent years. In the wake of Argentina's devastating financial crisis of 2001-2002, the government of Nestor Kirchner, who was succeeded by his wife, Cristina Fernandez de Kirchner, began to curb exports with taxes and cap prices to keep milk and beef cheap for consumers.

Steadily rising taxes came to a boil last year, when President Fernandez de Kirchner attempted to hike taxes on oilseed exports – soy is already taxed at 35 percent – as prices soared internationally. It led to a four-month standoff that Fernandez de Kirchner ultimately lost in Congress.