BUENOS AIRES, Sept. 27 (UPI) -- Argentine expectations of windfall profits from recent hikes in soybean prices are complicating the government's fraught relationship with farmers.
President Cristina Fernandez de Kirchner has earned the ire of farmers' representatives over tariff and taxation policies that the agriculture sector sees as an obstacle to its growth and equitable distribution of income among farmers.
Farmers' representatives and Fernandez have been at loggerheads over more or less the same issues -- taxation and government intervention -- before the president won a second term in office last year.
The landslide victory in October 2011 was welcomed by the president's supporters but greeted with dismay by farmers' groups who saw their demands ignored again.
Recent spikes in soybean markets gave Argentine officials cause to celebrate what they predicted would be a bonanza for Argentina amid sweeping austerity and deep cuts in imports.
Argentine agriculture experts are unconcerned over price drops in response to reports of high U.S. yields, pointing out that the upward trend in soy prices is likely to continue through 2013.
The soybean market isn't stable, however. Recent reports of big crops in Argentina, Brazil and other South American countries as well as the United States cast a shadow on the market. Traders said the price fluctuations are temporary.
Analysts said that soybean prices could still be affected by lower-than-expected soybean crush in the United States and declining demand from China.
Fears of low yields in Argentina and other South American countries in the path of La Nina drought phenomenon pushed prices up earlier in the year before calm returned to the markets.
Predictions of a drought-related scarcity of supplies, similar to that experienced in 2008-09, haven't been supported by events.
Analysts said the government's optimism over the soybean yields this year could still be misguided and the expected windfall might simply not occur.
La Nina also affected corn crops in Argentina and neighboring countries, a fact often not reported in the regional media.
A grains and oilseeds study estimates Argentina's soy crop could increase 38 percent in 2013, when world supply will become more dependent on South America because of anticipated smaller yields in China and the United States.
'The world market will become more and more dependent on South American supplies in March/September 2013 because of soybean inventories significantly lower in the U.S., China and other countries towards February 2013," Oil World consultancy said in a report.
At the beginning of next year South America will begin harvesting an enormous crop of soy with a strong export demand that will help alleviate the tight global supply, following the severe drought suffered in the Americas.
In this scenario Oil World estimates Argentina's soy crop to increase 38 percent to 56 million tons from the 40.5 million tons of 2012, while Brazil is expected to harvest 82 million tons compared to this year's 66.4 million tons, MercoPress reported.
Brazil and the United States lead the soybean market, with Argentina the immediate third major exporter of the commodity.
Other South American countries soybean crops are also expected to be bountiful, the study said, citing expected output in Bolivia, Paraguay and Uruguay.