Freight, labor woes dog Argentina soybean crop

OREANDA-NEWS. May 25, 2015. Ship traffic surrounding Argentina's most important ports for agricultural exports has come largely to a standstill after three vessels grounded this month off San Pedro, Buenos Aires province, blocking most of the large-ship traffic on the Parana river.

Although there is an alternative route that ships can use, it can only accommodate empty vessels.

A ship carrying soybean flour and pellets to Peru was the last one to get stuck this morning. Although it was released within two hours, it prompted the coast guard to close the area to transit in order to analyze whether to impose new transit restrictions, the San Pedro coast guard said, declining to release an estimate on when traffic could resume.

"Over the last 10 days, three vessels became stuck off San Pedro, which led to delays for 48 ships," Capym ports chamber manager Guillermo Wade said.

The freight bottlenecks come on top of persistent labor strife at the height of the soybean harvest season.

"We're in a very atypical situation for this month," said Patricia Bergero, an analyst at the Rosario grain exchange. "Although there has been a good quantity of product, sales have been dropping because storage facilities are full."

A group of oilseed crushers has been striking for 18 days. Although the workers in the key export hub of San Lorenzo, outside the city of Rosario in Santa Fe province that is responsible for three-quarters of the country's output, have not joined the protest, most exporting companies have been cutting back on purchases.

"They're expressing solidarity with those affected by the strike and trying to pressure the government to push for an agreement between the union and the companies," one grains trader explained.

Another trader said companies are reluctant to seal purchases because of uncertainty about possible blockades of roads and ports that could make it impossible to move the product, potentially increasing costs. "Some companies may say they're expressing solidarity, but really they just don't want to lose money," the trader said.

Argentina uses part of its soybeans to produce biodiesel, some of which is exported.

Oilseed crushers are meeting with sector chambers at the labor ministry in Buenos Aires this afternoon and are warning the roadblocks that stopped most of the country's agricultural exports on 18 May could resume if there is no resolution, said union spokesman Walter Nardi. The union, which is demanding a 42pc wage hike, estimates that around 50pc of the country?s port activity has been affected by the strike.

The area affected by the strike impacts some of the largest companies in the sector, including Cargill and Louis Dreyfus, whose private ports have been paralyzed for more than two weeks.

"The prolonged conflict that is facing off oilseed crushers with industrial and export companies in the sector has escalated in such a way that the damage already transcends the parties in question," warned the Rosario grain exchange this week.

The situation could deteriorate after the CGT umbrella union in San Lorenzo called an indefinite strike featuring road and port blockades starting on 1 June. The action could effectively block all of the country's agricultural exports.

The string of work stoppages comes amid particularly contentious wage negotiations ahead of October's presidential election. Annual inflation is running at an estimated 35-40pc. Some unions say the government wants to keep annual wage hikes below 30pc, a claim that the outgoing government denies.

Around 80pc of the country's soybean harvest, estimated at a record 60mn t, is complete, according to the Buenos Aires grains exchange.