The US government has blamed Argentina's unpredictable tax and export regime for the South American country's being "relegated to a minor role" in the world wheat market.

Argentina's record of "unexpectedly imposing export restrictions and taxes" on commodities was the biggest reason for the country's drop to a share of 2% of world trade in wheat, the US Department of Agriculture said.

"That [record] not only has created an uncertainty for famers and jeopardized their export sales and profitability, but perhaps also encouraged them to shift to crops less affected by government intervention," the USDA said in a grains briefing.

Combined with the effects of drought, Argentina had become an "unreliable supplier of wheat to the world market", the report said.

Power shift 

The broadside comes as Argentine farmers' political sway appears to be on the rise, after President Cristina Fernandez, who fought repeated pleas to cut export taxes, lost control of Congress in June elections.

The government a week ago, at a meeting with the country's four main farmers' unions, offered to lift restrictions on wheat and corn exports, while keeping a levy of 35% on soybean shipments, to which growers most object.

The battle is likely to spread to Congress when it, on August 24, takes back powers for export taxes.

"Congress... could implement changes much more to the unions' liking," Vic Lespinasse, the GrainAnalyst.com analyst, said.

Tax impact

Argentina's exports are on course to fall to 2.5m tonnes in the current 2009-10 marketing year, their lowest in 35 years.

Exports at this level are comparable to lesser-known wheat players such as Turkey, and well below those of the big league of shippers such as Russia and the European Union which Argentina used to belong.

Argentina's production is pegged at 9.5m this year, a little over half the 2007-08 levels, reflecting relatively low yields of about 2.7 tonnes per hectare and reduced plantings, in part down to low rainfall and in part to farmers' dismay at levies.

"High taxes on wheat exports and low wheat prices have discouraged farmers from planting as much wheat this season as in previous years," the USDA said.