March 27, 2008

 

Argentine grain exporters seen facing wave of contract defaults

 

 

Argentina's grain exporters are facing a wave of contract defaults due to a very high level of commitments and a nationwide farm strike that is preventing them from getting that grain to port, according to industry players.

While unconfirmed, there are reports that some exporters already have defaulted on shipments and several ships that had been on route for loading in Argentina have been diverted to other destinations, said an analyst who asked not to be named.

 

"The exporters don't have any stocks left, neither to ship nor crush," said the analyst.

 

He said that "several suppliers of Argentina soy and soyoil have declared force majeure on cargoes to China. Up to 1 million tonnes of bean exports and five cargoes of soy oil have been affected, some of which - likely 300,000 to 500,000 tonnes - have been substituted with costlier US soy."

 

With the soy harvest kicking off, exporters had expected to start processing and shipping the first beans from the 2007-08 crop.

 

The problem is particularly serious with corn, which is in full harvest. Exporters already have declared commitments to ship 7.6 million tonnes of new crop corn, according to the Agriculture Secretariat. However, exporters have just 45 days from when they make an export declaration to when they actually ship the corn. The farm strike looks set to prevent the shipment of such a very high amount in such a short period.

 

When opening the corn export registry in January, the government shortened the period for shipping to 30 days plus a 15-day grace period, compared with the year that had previously been allowed.

 

In addition, there are no signs that an end of the farm strike is in sight.

 

On Tuesday, farm groups announced that they would continue the nationwide strike indefinitely to continue protesting a sharply higher export tax on soy imposed by the government earlier this month.

 

The government has said it won't bend to their demands. "I will not give in to any extortion...none," President Cristina Fernandez said at a press conference Tuesday.

 

Farmers already have been on strike for 14 days, demanding that the new tax scheme be scrapped.

 

Transport to the nation's primary export ports in Rosario remain closed by the strike and road blocks. Not one grain truck made it to the Rosario port complexes on Wednesday, compared with about 5,500 on the same date last year, according to the Rosario Grain Exchange.

 

Farmers will continue to harvest the ripening soy, corn and sunflower seed crops and place the grain in local storage units, but only transport to local silos will be allowed, Argentine Agrarian Federation President Eduardo Buzzi said Tuesday.

 

On March 11, the government announced a sweeping overhaul of the export tax structure on grains and derivative products. A sliding scale was implemented, with rates increasing as export values rise.

 

The higher export taxes follow a series of measures designed to shield domestic consumers from the effects of sharp food inflation and to increase state revenue. Farmers have bitterly complained about the export limits, higher taxes and price caps, which have trimmed profits.