May 26, 2021
Multitude of Logistical Problems Impacting Argentina
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
There has been a lot of news recently concerning logistical challenges in Argentina including the following:
Port Workers at Rosario, Argentina Strike over Lack of Vaccinations - Grain exports from Argentina's main export hub of Rosario came to a halt last week due to a strike by port workers who are demanding that they be given priority for Covid-19 vaccinations. Argentina registered a record daily high infection rate of Covid-19 last Tuesday as the country struggles with a wave of new infections. Argentina is now one of the five countries with the highest daily infection rates.
The strike involves workers who prepare the vessels for docking and departures, tugboat captains, and sailors who guide the vessels to and from the docks.
At least seven vessels that were loaded with soybean meal and corn last Tuesday were not able to immediately leave the dock due to the strike. The stranded vessels have since been towed from the docks and set sail. Late last week, the grain inspectors at the port joined the strike. The workers threated to strike again this week if their demands for vaccinations are not met.
At the start of the strike, the union had indicated that they lost four of their members in just the previous seven days, which indicated the ultra-high level of infections within their ranks. In addition to be given priority for vaccinations, they are demanding prevention protocols and medical attention at all of Argentina's ports.
The strike is impacting the Rosario export hub which is responsible for approximately 80% of Argentina's agricultural exports. Argentina is the world's largest exporter of soybean meal and soybean oil and the third largest exporter of soybeans and a major exporter of wheat.
Low Water Levels on Parana River an Ongoing Concern - Complicating the situation even more is the declining water level on the Parana River. It takes a minimum draft of 34 feet for a fully loaded vessel, but as of late last week, the draft had already dropped to 31 feet and it is declining on a daily basis.
The vessels that could not set sail last week included six Panamax-sized ships with deadweights up to 70,000 tons and one Handy size ship with a deadweight up to 45,000 tons. Additionally, there were another 13 vessels that had stopped loading operations last week in order to avoid the same problem.
Brazil and Paraguay to Release Water from Itaipu Dam - Brazil and Paraguay agreed to release additional water from the Itaipu reservoir in order to increase the flow of water in the Parana River. The increase flow started last Friday, and it is scheduled to last 11 days. The flow was increased in order to help move 125,000 tons of soybeans that have been stranded on barges in Paraguay for over 50 days due to low water levels.
The water was released on the condition the Paraguay would not use the added flow to generate electricity, but to just allow the water to pass through downstream dams. The Parana River basin is suffering from one of the most severe droughts in recent memory. This is the second time in two years that similar action has been taken to increase the flow of the Parana River and it is unclear if further action will be needed before the traditional summer rainy season returns in September and October.
Argentina Beef Exports Prohibited for 30 Days - The Argentine government announced last Friday a suspension of beef exports for a period of at least 30 days in an effort to slow down domestic food inflation, which is running at approximately 50%. Needless to say, farmers in Argentina are up in arms over this decision, but it should not have come as a surprise.
Mrs. Kirchner is the current Vice President, and it was she and her husband who started commodity export taxes and export market interference in Argentina more than 15 years ago. I suspect that she is behind the current interference in the export market because that is her "Playbook." If history is a lesson, it is doubtful if the beef export suspension will be lifted after 30 days. The last time such action was taken, it stayed in place in one form or another for years.
Farmer Strike in Argentina - Farm organizations in Argentina are threatening a strike due to the government's recent suspension of beef exports for a 30-day period. When farmer strikes occur in Argentina, they usually involve farmers holding off on any sales for a period of time. For farmers and ranchers with cattle to sell, they can only hold their cattle off the market for a short period of time before they are forced to sell. Therefore, such strikes are mostly symbolic.
A strike by grain farmers would be much more important for the market. Grain farmers can easily hold back on selling their grain for an indefinite period of time. In fact, Argentine farmers are already slow sellers of their 2020/21 production because they view their grain as a hedge against inflation and the potential for a devaluation of the Argentine peso.