May 15, 2020

More Logistical Problems at Argentine Ports along the Parana River

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Logistical problems caused by low water levels on the Parana River at Rosario, Argentina were made even worse earlier this week by the collapse of the river bank south of Rosario. Dredging operations are underway to clear the debris, but there is no timeline when normal operations may return.

Even before the collapse, the low water levels caused restrictions on how much each vessel could be loaded. If a vessel normally held 50,000 tons, the last 11,000 tons were not loaded due to the low water levels. The vessels then have to top-off their loads at deep water sea ports before heading out to sea.

The low water levels are the result of a prolonged drought in southern Brazil and northern Argentina. The water level is at a 50-year low and it was the lowest ever recorded during the month of April.

Argentina received a bit of good news this week. After more than a month of negotiations, Brazil, Paraguay, and Argentina have agreed to increase the discharge of water from behind the Itaipu hydroelectric dam, which is upriver from Rosario on the Parana River. This is the second time that Argentina has requested for more water to be discharged.

After the first request, Brazil and Paraguay increased electricity generation, which increased the water discharge, but the demand for electricity has been declining due to the Covid-19 pandemic. Therefore, they are going to increase the water discharge this time by opening the spillway for an initial 12-day period starting on May 18th.

The ultimate solution is increased rainfall, but that may not occur until spring rains return next September-October-November.

Argentina is the largest exporter of soybean meal and the third largest exporter of soybeans and corn. Farmers are in the midst of harvesting their two biggest crops with 87% of the soybeans harvested and 40% of the corn harvested. The logistical problems on the river could not have come at a worst time because this is the peak of the export season in Argentina. The ports near Rosario are responsible for 80% of Argentina's grain exports.

The low water level is also negatively impacting soybean exports out of Paraguay. Usually, about 30% of Paraguay's soybean exports are barged down the Parana River to ports in Argentina and Uruguay. The soybean exports from Paraguay usually wrap up about mid-July, but Paraguay may not complete their soybean exports this year until the water level improves in September or October.

The USDA estimates that Paraguay produced 9.9 million tons of soybeans in 2019/20 and they are expected to export approximately 6 million tons of soybeans.