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ECONOMY | 07-04-2022 21:31

Diesel shortages wreak havoc as top soy exporter starts harvest

Argentina is grappling with shortages of diesel fuel that powers tractors and trucks just as the soybean and corn harvests pick up.

Argentina is grappling with shortages of diesel fuel that powers tractors and trucks just as the soybean and corn harvests pick up in the powerhouse crop exporter.

Farmers ready for fieldwork and truckers who drive the crops to port are reporting rationing and soaring prices across the Pampas growing belt, with protests this week along key trucking routes. Argentina is the world’s biggest exporter of soy meal and soy oil and the third-biggest corn supplier.

If the soy harvest gets delayed, plants would start to shed beans and lose yield, according to Esteban Copati, head of crop estimates at the Buenos Aires Grain Exchange. High diesel prices, he said, also risk squeezing profit margins that are closely watched by traders because they impact farmers’ planting and selling strategies.

Oil-rich Argentina produces plenty of diesel, but it also intervenes in energy markets. Right now, it’s trying to shield Argentines suffering inflation running at 52 percent from the global oil rally. Local crude traded at around US$60 a barrel in March even as international prices climbed above US$100.

The ample difference has encouraged drillers in Argentina to export crude oil rather than supply domestic refiners like state-run YPF SA, which accounts for more than half of the nation’s fuel sales, and Raizen. They’re making up for the shortfall with imports that have become hard to source amid the Russia-Ukraine war.

There are talks to keep more crude in Argentina. “We are trying to improve prices in the second quarter,” YPF’s Chief Financial Officer Alejandro Lew said in a March 22 interview. “We are pushing a little bit harder and stronger for upstreamers to leave some extra barrels in the local market.”

YPF said in a statement on Tuesday that it would grow diesel output in April and May and “guarantee” supplies for harvesting.

Increasing Argentine diesel’s bio-blend mandate to make the fuel less dependent on provisions from drillers and more on biodiesel made from soybeans would help alleviate shortages, according to the Federation of Grain Elevators. Argentina slashed the blend mandate by half last year.

by Jonathan Gilbert, Bloomberg

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