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Feature: Parched Parana river disrupts Argentina's soybean exports

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Feature: Parched Parana river disrupts Argentina's soybean exports

Highlights

January-May soybean exports slide 57% on year

Water level at Rosario hub at 80-year low, nears sea level

Brazil, Paraguay also face months of shipment delays

Rapidly receding water levels in the Parana River are testing Argentina's soybean trade, as the risk of grounding reduces vessel loads, disrupts port schedules and delays shipments.

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Soybean exports from the key inland port of Rosario plunged by more than two-thirds to 271,808 mt over January-May from a year earlier due to the low water level in the river, according to Ministry of Agriculture data.

The water level at Rosario, which ships around 80% of agricultural exports from Argentina, was around 40 cm above sea level on June 22, well below the historical average of 3.5 meters above sea level, according Argentina's national water agency INA.

By July 6, the level was forecast to fall to just 7 cm above sea level, INA said.

The situation was expected to become even more critical in coming weeks as the prolonged dry spell continues, INA added.

"The descending levels of rainfall in the northeast of the country and in the Brazilian basins of the Paraná and Iguazú rivers have been causing the decrease in water levels. It is believed that the levels will continue to fall, because from now on, a period of low rainfall is entered until December," Ricardo Passero, head of research at Argentine commodities and securities brokerage firm Intagro SA, told S&P Global Platts.

According to the Rosario Grain Exchange, or BCR, the current level of the Parana River is the lowest in eight decades, and exporters and traders were increasingly reducing cargo volumes loaded onto ships to avoid grounding.

Shipment delays impact port operations

Low water levels restrict navigability and increase the cost to exporters of transporting goods, complicating port operations.

In 2020, which marked the worst downspout on the Parana in 50 years, exporters suffered losses of up to $244 million as vessels were unable to carry full loads, according to the BCR.

Vessels have been reducing cargoes by as much as 5,500-7,000 mt in order to pass through channels, leading to delays in shipments and a pile-up of stocks at port terminals, according to Platts Analytics. A large vessel at Rosario can typically haul up to 50,000 mt.

A dredging concession in the Parana held by Belgium's Jan De Nul NV was terminated June 30 and the management transferred to the General Ports Administration for 12 months while the Argentinian government prepares a longer-term tender.

That decision is likely to compound uncertainty around port operations in coming weeks as the water level situation worsens.

The persisting delays in transporting grains was strengthening the FOB basis in Argentina, according to analyst Luigi Bezzon at commodity research company StoneX.

"The navigation of grains is being affected by the low flow of the river, as ships are undocking with smaller volumes on board to avoid grounding. This deficit in shipped volume should grow as the river level decreases in the coming weeks, increasing the costs of transporting grains in Argentine ports and strengthening the basis," Bezzon said.

However, Argentina's government on July 1 cut the biodiesel mandate for the month to a 5% blend in diesel from 10% previously, which was likely to reduce demand for agricultural blendstocks, adding downward pressure to the basis, according to analysts.

Argentina's total soybean exports fell 57% year on year to 1.31 million mt over January-May, Ministry of Agriculture data showed. The country is the world's third-largest exporter of raw soybeans and the largest exporter of soybean oil and meal.

Exports also bank in Paraguay, Brazil

Brazil and land-locked Paraguay have also begun experiencing months of delays in soybean shipments due to the dry riverine conditions along the Parana, which flows through all three countries.

Shipments in Paraguay have been delayed by more than a month, with the next shipments on the Parana now likely to occur only in September, with no window in July, according to the Center of Fluvial and Maritime Shipowners of Paraguay.

Paraguayan vessels transport soybean and soy complex products to both Rosario and Nueva Palmira port in Uruguay for crushing or export.

In Brazil, the National Water and Basic Sanitation Agency, or ANA, on June 1 announced a water emergency across the Parana basin amid a severe rainfall deficit since October 2019.

Infrastructure Minister Tarcisio de Freitas at the time said that redirecting water for power generation will disrupt navigation on the Tiete-Parana waterway, the country's fourth-largest waterway for cargo transport.

Reduced ship traffic is expected to significantly slow down cargo movements to and from farm states including Goias, Minas Gerais, Sao Paulo, Parana and Mato Grosso do Sul, the minister said.

According to Bezzon, Argentina is also likely to postpone the peak of its shipments in 2021 as the falling water level stalls port operations.

However, it was still too early to assess the full impact on annual soybean and soy product export volumes, as the outlook for dry weather was expected to persist for several months, he added.