Last week, the government raised duties on soy and sunseed sales abroad -- a measure that has infuriated exporters and farmers, who are staging a week-old strike that has paralysed grains markets.

The higher taxes could also have a longer term impact, said Egidio Mailland, president of the Association of Argentine Cooperatives (ACA), the nation's No. 8 grains exporter.

"Putting a ceiling on the soy price means the crop's profitability is abruptly altered in areas where it's impossible to improve yields, in areas where the climate isn't best-suited," he told Reuters.

Industry analysts have also said last week's tax shake-up could hit output of the oilseed in less profitable parts of the country, the world's third-biggest soy supplier and its top exporter of soyoil and meal.

Announcing the new sliding-scale export duties system, Economy Minister Martin Lousteau said it would guarantee farmers price stability, but Mailland said it would destroy the futures market and make it harder for farmers to plan.

"If I don't know how much tax I'm going to be paying in three months, I can't put a value on the grains within three months ... They've thrown out all the traditional systems," he said.

ANGER

Seeking to boost the production of corn and wheat -- which weigh heavily on local food price inflation -- the government trimmed export duties on those grains.

However, Mailland said anger among farmers over continued government intervention in the wheat market would likely reduce the 2008/09 crop area when sowing starts in May.

The 2007/08 wheat export registry remains closed as the government seeks to safeguard domestic supplies. The closure has driven down prices in the local market at a time when costs have almost doubled, Mailland said.

"There is a despondency and a phenomenal decline in sowing intention. This is very serious," he said, adding that surveys conducted among ACA members showed farmers plan to sow between 30 percent and 40 percent less wheat this year.

Last week's tax overhaul also involved a hike on the levy on biodiesel sales abroad to 20 percent from 5 percent.

ACA, which exported some 2 million tonnes of grains and 1 million of by-products last year, is about to move into the country's fast-growing biodiesel industry with the construction of a $50 million plant at a port on the Parana River.

Mailland said the joint venture was still on track although the tax hike had "taken a big chunk" out of potential profits.

The association, which accounts for more than 10 percent of Argentine grain production, is also involved in the supply of fertilizers, seeds and vaccines for ranchers and is the top honey exporter.

Despite the current tension, Mailland said Argentina's output of grains might cross the 100 million tonne mark in 2008/09. Last season, a record harvest totalled 95 million tonnes, but drought and frosts have hit the current campaign.

He said such levels of production would strain transport capacity, and called for more spending on road building.

"This is one of the things that's being asked for now (that) they're taking a big part of our earnings," he said.