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Argentina's soybean trade could be affected for months on river dryness: sources


Dam water release may be a temporary fix

Argentinian soybean traders, crushers facing costly delays

Argentinian soybean trade could remain affected for months on river dryness, before significant amount of rain hit the region in the last quarter of 2020, market sources said.

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Due to prolonged dryness since January in the southern Brazil and northern Argentina, water level of all the major rivers, including Parana river went down significantly. As a result, commodities transportation in Argentina is severely affected as the Parana river carries almost 90% of country's commodities through the river.

Argentina is world's third largest exporter of raw beans and top supplier of soybean meal and oil. The country is heavily dependent on its river water transportation for soybeans and soy complex supplies.

Although, on May 16, Brazil has agreed to release water from its Itaipú dam to alleviate Parana River's water level, market participants see it as a temporary solution to a long-term problem.

According to agro analysts, water levels in Parana and other major rivers may not improve before October, when the region experiences spring season rains, with average precipitation level of 100 mm for the month.

Rosario port, located on the banks of Parana River, handles about 95% of soymeal and soybean oil shipments, has scaled down its operations, said Eugenio Irazuegui, market analyst at agro consultancy Zeni. Ships must complete loads at other terminals and this inevitably increases the logistics costs.

Water levels in Rosario have reached 30 year lows and will not improve until more rain falls within the basin, the US Department of Agriculture said in its April report.

Grain carrying ships need to reduce the loading according to the drop in water level, the trade association Rosario Board of Trade, or BCR, said earlier.

River dryness issue in Argentina comes at a time when the country's soybean harvest period is at its peak.

Argentina's crushing industry -- the world's second largest -- is facing costly delays in the supply of raw beans and soy complex products, a market source said. Crushers are forced to use their existing soybean stocks to process soy meal and oil, as supply of newly harvested crop is delayed.

The country's soybean harvest as of May 13 was 87.4% through the projected planted area of 17.4 million hectares for the 2019-20, a Buenos Aires Grain Exchange report said on May 14.

The pace of all exports (including soybeans) will be hampered by low water levels on the Parana River, which will limit vessel draft and navigation and thus the volume that vessels can be loaded to, the USDA's attaché said.

According to average market estimates, Argentina is forecast to export 7 million - 8 million mt of raw soybeans in calendar year 2020, down 12% year on year, while soybean meal exports are expected at 28.5 million mt, down 1% on the year.

If the dryness continues across the Argentinian rivers, the exports forecast could be revised down in coming months.