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April 27, 2020

Argentina Askes Brazil to Continue Increasing Flow on Parana River

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The height of the water in the Parana River at the ports near Rosario, Argentina is the lowest in 50 years and the lowest ever recorded during the month of April since records started in 1884 according to the Rosario Grain Exchange.

The water height last Wednesday was 0.4 meters and it increased to 0.5 meters last Friday. The normal height for the month of April is 4 meters.

As the water level continues to drop on the Parana River at Rosario, the Argentine government has asked the Brazilian government for a second time to allow more water out of the reservoir behind the Itaipu Dam. Brazil agreed the first time by increasing the discharge from about 6,000 cubic meters per second to 7,000 cubic meters per second about ten days ago, but that was not enough to significantly increase the water level and besides it takes several weeks for the water to make its way downriver to Rosario.

As of late last week, Argentina is requesting that the discharge be increased to 8,000 cubic meters per second. Discussions are ongoing and any increase in the discharge must be coordinated with Paraguay which is a partner with Brazil in operating the hydroelectric dam.

The low water level has caused shippers to not load grain vessels to their capacity. A Panamax size vessel has a capacity of 60,000 tons, but that is being restricted to 50,000 tons due to the low water levels. The vessel must then go to a sea port, usually Bahia Blanca in southeastern Buenos Aires province, to top off the load. This slows down the process and adds to shipping costs.

The Rosario Exchange estimates that the logistical problems at the ports could cost the ag sector US$ 244 million during the first four months of 2020. One of the extra costs comes from the fact that the Port of Bahia Blanca is a long way from the heart of the soybean and corn production in Argentina. As a result, the grain will have to be trucked from central Argentina to the port to meet the demand.

This could not have come at a worst time as farmers in Argentina are in the midst of harvesting their 2019/20 soybean and corn crops. The soybeans in Argentina are 56% harvested and the corn is 34% harvested. Argentina is expected to produce approximately 50.0 million tons of soybeans and 49.0 million tons of corn. More than 80% of Argentina's grain exports move through the ports on the Parana River in the vicinity of Rosario. Argentina is the largest exporter of soybean meal and soybean oil and the third largest exporter of soybeans and corn.

Water experts contend that there have been problems with low water flow on the Parana River since mid-2019. They fault the three countries for not having set up guidelines on how to deal with this type of situation. They contend that trying to set up guidelines in the midst of a crisis results in a chaotic situation.

To make the situation even worse, Brazil is now entering into its annual dry season and the rainfall in southern Brazil will probably be light until about September. This has led energy exports to worry that allowing too much water out of the reservoir could lower the water level enough to hamper electrical generation.