Argentine rancher Gustavo Giailevra has seen 425 of his cattle, a quarter of his herd, die of thirst in the last year and now he watches helplessly as the survivors bellow for water at dry wells.

Argentina's beef industry and wheat and corn production have been devastated by the country's most severe drought since 1961, which has also affected agriculture in neighboring Uruguay, Paraguay and southern Brazil.

The crisis is compounded by the world economic slowdown, which is cutting demand for farm products and draining state finances just as ranchers look to the government for help.

"The situation is terminal," Giailevra said, surveying the stinking cow carcasses on his ranch near the town of Tostado in Santa Fe province in northern Argentina. "We are in God's hands. Our water reserves are gone."

The drought has killed 300,000 head of cattle and caused at least $600 million in farm losses in Santa Fe. Authorities are trucking in water but it is not enough and producers are demanding longer-term solutions.

The drought has renewed tensions between the central government and farmers, who are resentful after a deep conflict last year over export taxes that froze grains trade for weeks and turned into a major political crisis for center-left President Cristina Fernandez.

In a sign that frustrations are mounting again, farmers blocked a main highway in southern Santa Fe on Thursday to protest Fernandez's agricultural policies.

Last year, at the height of the dispute, farmers blocked highways around Argentina's vast farm belt for days, eventually forcing Fernandez to back down on her tax hike on soy exports.

GOVERNMENT MEASURES

In response to the drought and the global economic crisis, the government recently announced it would lower export taxes on wheat, corn, vegetables and fruit. It also launched subsidized loans for farm machinery and vowed to hold down fertilizer and pesticide prices.

"We have taken measures, it's not that we haven't heard about the problems ... we're working in Santa Fe, Chaco and other provinces," Agriculture Secretary Carlos Cheppi said this week, citing millions of dollars in free cattle vaccines.

Leading newspaper Clarin reported on Friday that the government will spend between $170 million and $280 million more on aid.

Giailevra says ranchers don't want subsidies. In his area, cattle ranchers are asking the government to build an irrigation system to bring water from nearby rivers.

"We are responsible as well for playing along with politics as usual and, until now, not insisting on long-term emergency planning," Giailevra said.

"You see the animals suffer. You see the capital you built over a lifetime disappear, and you see your children leave home because you can't support them," he said, his eyes filling with tears.

Argentina is a major beef producer, famous for its range-fed cattle. It is also the world's No. 3 soybean exporter, its No. 2 corn supplier and a major wheat exporter.

The government has not released national drought damage statistics but it has steeply slashed its forecast for the current wheat crop, and the U.S. Department of Agriculture did the same for the corn crop.

Corn and wheat prices on international markets have remained low as the global recession worsens, weakening demand. The drought has also created supply worries over soy and driven up prices for the oilseed in recent weeks.

TOASTED

Cows can only live seven or eight days without water before their legs give out and they can no longer get up, said Lazaro Monges, the manager of another ranch in Tostado, which translates to "Toasted" in English.

He has lost 350 head of cattle in eight months, leaving about 2,500, and says water supplies will only last a few more days.

"More death is sure to come," said the mustachioed Monges, wearing a round, gaucho-style hat and multicolored waistband.

Tostado soy farmer Ricardo Mercau warned that the crisis could spread to the cities, as farm workers and ranch hands flee the countryside in search of work.

"This started as a financial problem and very soon it will hit the chain of payments to local businesses, which in turn will not be able to meet their obligations," he said.

German Heinzenknecht, an analyst at the Applied Climatology Consultants, said light rains are forecast for the weekend but the region needs sustained moisture to recover.

"We are far from being able to see real improvement," Heinzenknecht said.