In a bid to resolve a 19-day farm strike that has produced severe food shortages and a major political crisis, Argentina’s economy minister on Monday announced measures to compensate small-scale farmers for the effect of a recent controversial tax hike on soy exports.

Martin Lousteau says the government would offer refunds on export taxes equivalent to the loss that these smaller producers have incurred since the tax was raised under a new system introduced on March 11, when it provoked farmers to block roads and withhold supplies.

Vowing to challenge the heavy concentration of soy production in the hands of a few large producers, Lousteau says the measure would cover 80% of all producers – those who produce just 20% of the country's total output.

Additionally, special transport subsidies will be given to small producers in Argentina's more distant, poorer northern provinces.

And in what he says was a bid to shift more production to traditional products, Lousteau says cheap credit plans would be offered to dairy producers.

As with the measure announced on March 11 – which put in place a sliding-scale soy export tax rate based on international prices and which initially boosted it from a fixed rate of 35% to 46%, according to the prevailing international price for soy – Lousteau argued that the latest measures were consistent with an attempt to reduce the dominance and concentration of big soy producers.

The Argentine government has been caught off-guard by the length and magnitude of the strike as previous such strikes have been short-lived and had limited impact on food supplies.

Farmers have also made it clear that they are willing to absorb the high costs of lost crops and livestock sales.

The farm strike has already delayed harvest of the 2007-2008 corn and soybean crops.

Just 4.7% of Argentina’s soy crop was harvested as of March 28, 5.6 percentage points behind the harvest pace at this time last year, the Buenos Aires Cereals Exchange said in its weekly crop report on Friday.

However, last year's harvest was also delayed due to heavy rainfall, and this year's harvest is 16 percentage points behind the usual harvest pace, the Exchange said.

The delay implies risks that could affect yields and quality, the Exchange said.

Corn harvest progressed slowly over the past two weeks, advancing only 2.7 percentage points due to the farm strike, the Exchange said.

However, at 17% complete, corn harvest was still 5.4 percentage points ahead of the pace at this time last year. The Exchange did not release a report the previous week due to the strike.

Dow Jones News Service reported that stalls were empty at Liniers, Argentina’s leading slaughterhouse, again Monday. Daily newspaper La Nacion reported that the nation's supermarkets dispensed their last stocks of frozen meat over the weekend, and that aisles would remain bare until the strike ended.

Severe shortages of fruits and vegetables were also reported, with prices spiking to new highs. Wheat was not being delivered to the nation's millers, with expectations of coming bread shortages.

In addition, poultry production has been hit hard and the effects of the inability to obtain feed and send birds to market will be felt for the next six months, Roberto Domenech, president of the poultry processors center, told La Nacion.

Editor’s note: Richard Brock, The Corn And Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.