BUENOS AIRES, May 23 (Reuters) - Argentine stocks and bonds fell on Friday along with the peso after a meeting between the government and farm leaders failed to end a two-month dispute over grains export taxes.
The failure of the meeting late on Thursday deepened worries of political uncertainty among investors about a prolonged conflict that has seen President Cristina Fernandez's popularity ratings slide.
The benchmark MerVal index .MERV shed 1.7 percent to 2,210.26 points at 1:15 p.m. local time (16:15 GMT) as banking shares sagged, hurt by a fall in government bond prices also affected by developments in the farm talks..
Bonds traded locally fell on average 1.2 percent in midday trade.
On the MerVal, shares in Grupo Financiero Galicia (GFG.BA), which controls Argentina's biggest bank, dipped 4.1 percent to 1.87 pesos.
Local banks have seen their shares hit in recent weeks as the standoff has weighed on markets because they are obligated to hold government debt.
"With the end of the farmer conflict looking unpredictable, investors are moving out of their positions as uncertainty returns to the markets," said Leopoldo Olivari, a trader at Bacqui brokerage.
Farmers have staged two strikes since March over a tax hike on soy exports. They are calling for a change in the tax, and the meeting between farm leaders and the government was the first after farmers called off their second strike earlier this week to renew negotiations.
Argentina is one of the world's top suppliers of soybeans, corn, wheat and beef.
On the foreign exchange market, the peso currency weakened by 0.54 percent to 3.24/3.2424 per U.S. dollar ARSB= in informal trade between foreign exchange houses, as measured by Reuters. In formal interbank trade the peso was virtually flat at 3.135/3.1375 per dollar ARS=RASL. (Reporting by Walter Bianchi, Writing by Kevin Gray; editing by Leslie Adler)