Argentine gov't fights for control of farm taxes

* Congress debates president's power to levy export taxes

* Lower house expected to renew the powers

* Extension still needs Senate approval

BUENOS AIRES, Aug 12 (Reuters) - Argentine lawmakers debated on Wednesday whether to extend President Cristina Fernandez's power to set farm export taxes in her first political test after losing control of Congress in a mid-term election.

The levies bring billions of dollars into state coffers and are the focus of a protracted dispute between Fernandez and the nation's farmers, who have led protests to demand tax cuts.

Backed by small opposition parties, the government was expected to win a vote in the lower house of Congress later on Wednesday to help Fernandez retain her ability to levy export taxes without congressional approval.

The legislation then moves to the Senate.

Argentina is one of the world's leading soy, wheat and corn producers. Some opposition leaders back farmers' calls for lower taxes on agricultural exports and want to limit the extraordinary powers, which expire later this month.

Farmers say the taxes are choking off production and are particularly angry over the 35 percent rate on soy, the country's top crop.

But the government defends the tax-levying powers as key to confronting a slowing economy and constricted tax revenues. Fernandez is seeking a one-year extension.

"If the powers are withdrawn, then we'd ask Congress to tell us how they plan to replace these resources, where they plan to cut spending," Economy Minister Amado Boudou told Radio Mitre.

Fernandez holds a majority in the 257-seat lower house until a newly elected Congress is seated in December. Her support was weakened after she lost control of Congress in a June 28 legislative election.

The Argentine government must meet some $13 billion in debt payments in 2010 as tax revenues contract and social welfare demands mount.

Argentina is the world's No. 3 soy exporter and soy export tax revenue is estimated at about $5 billion this year.

The country's cooling economy has reduced the government's primary budget surplus, which it relies heavily on to meet debt obligations.

Seven years after a debt default, Argentina remains shut out of global credit markets because of a lingering dispute with holders of defaulted bonds who rejected a 2005 debt restructuring. (Reporting by Kevin Gray; editing by Todd Eastham)