Mar 08, 2021

Potential Logistical Problems Could Develop in South America

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

There is a possibility of several logistical problems may occur in South America over the next several months including: the Covid-19 pandemic in Brazil, low water levels on the Parana River in Argentina, and wet weather at Brazilian ports.

Covid-19 Pandemic in Brazil - The situation in Brazil is now worse than it has ever been. They announced last Friday that there were 75,500 more cases and 1,800 more deaths during the previous 24 hours. These are the worst numbers thus far during the pandemic. Incompetence and ineptitude on the part of the Brazilian government has led the country to a very grim place. The President has downplayed the pandemic from the beginning and he has refused to aggressively purchase vaccines. While the U.S. is vaccinating more than 2 million people per day, in all of Brazil, they have vaccinated only a little more than 7 million Brazilians total.

I bring this up because there is a possibility of labor unrest at the Brazilian ports if the situation continues to deteriorate and there is no hope of widespread vaccinations any time soon. Last year, the Brazilian ports did a very good job keeping the port workers healthy and working. The situation is now much worse than it was a year ago and it remains to be seen if they will be able to repeat that success. For example, the Governor of the state of Sao Paulo where the Port of Santos is located, is already talking about new lockdowns.

Low Water Levels on Parana River - Last year, vessel loading at the Port of Rosario in Argentina was hindered by low water levels on the Parana River. Vessels had to leave with less than full loads and they were forced to top-off their loads at ocean ports. The situation improved when Brazil and Paraguay agreed to increase the discharge of upstream dams.

The rainfall in Argentina has once again been below normal during the summer rainy season, which is when the rivers should be recharged. If the rainfall does not improve over the next few months, I would not be surprised at all that the water level on the Parana River gets very low once again in June-July-August-September.

Wet Weather at Brazilian Ports - With the delayed Brazilian soybean harvest, there is going to be a real crunch at Brazilian ports to export the maximum amount of soybeans in the shortest possible time. The problem is that loading is suspended during period of wet weather. The exports during February were already below desired levels and I would not be surprised if the exports during the first half of March also end up below expectations. The weather in northern Brazil has been exceptionally wet, which could impact loadings at the "Northern Arc" of ports along the Amazon River.