Rising to the challenge

Landlocked Paraguay is overcoming logistical obstacles to become an increasingly important player in the soyabean export sector alongside its South American neighbours Argentina and Brazil Gill Langham

Paraguay is emerging as a modest but key player in the soyabean export sector, according to analysts.

The country’s soyabean production in 2021/22 is projected at 10.5M tonnes, according to an United States Department of Agriculture (USDA) report, with exports forecast at 6.5M tonnes.

Soyabean production in 2020/21 was lowered to 9.9M tonnes due to a delayed harvest preventing farmers from planting second-crop soyabeans, according to the USDA’s Global Agricultural Information Network (GAIN) 8 April report, with exports projected at 6.75M tonnes.

In terms of export volumes in a typical year, Paraguay has been moving closer to Argentina, says Darren Cooper, a senior economist at the International Grains Council (IGC).

“While Brazil and the USA are the dominant soyabean exporters, a number of relatively modest exporters have seen their respective export volumes expand over the past decade or so as global trade has advanced, led primarily by growing demand in Asia,” he says.

“While Argentina has traditionally been an important supplier within this grouping, Paraguay has emerged as a key seller to international markets.”

Shipping primarily to neighbouring Argentina, Paraguay also supplies markets further afield, but its landlocked position in South America creates extra costs compared to its competitors, according to an 8 February World Grain article on the country.

Paraguay’s geographical position, sandwiched between Brazil and Argentina, also causes logistical problems. Other factors such as low water levels on the country’s key waterway, the Paraná River, have also impacted activity recently.

Last year, Paraguayan exporters faced severe problems due to low water levels on the Paraná River and this has continued to affect the country’s soyabean shipments this year.

Reports earlier in the year indicated that sizeable quantities of soyabeans – up to 600,000 tonnes – had been held up at ports in Paraguay, awaiting improved river conditions, Cooper explains.

“Given that the bulk of Paraguayan shipments head to Argentina, port difficulties in Argentina will negatively impact the ability of exporters to dispatch fresh cargoes,” Cooper says.

While March/April exports of soyabean meal and soyabean oil by Argentina were ahead of the previous year due to strong u

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Low water levels on the Paraná River continue to affect Paraguay’s soyabean shipments Source: Adobe Stock

u demand from key buyers and high prices, he adds, some shippers were unable to dispatch cargoes fully-loaded.

However, after negligible volumes were exported by Paraguay during the first two months of 2021, the early months of the local Paraguayan marketing year for exports – 1 March 2021 – saw an upswing in volumes, with the total for March-June reaching 3.62M tonnes. This was 20% higher than in the same period in the previous year and the largest amount ever dispatched during this stage of the season, tied particularly to heavy shipments to Argentina. However, with recent reports suggesting that navigability of the Paraná River could be impacted significantly through to the end of the year because of declining water levels, it is unlikely such volumes can be sustained, Cooper adds.

Export destinations

Argentina is currently the principal destination for whole Paraguayan soyabeans, according to the USDA.

As the average protein content of Paraguayan soyabeans is higher than Argentine beans, the blending of Paraguayan beans allows Argentine crushers to meet their buyers’ protein specifications, the report says.

While exports to Brazil in 2019/20 were largely driven by the scarcity of Brazilian soyabeans, according to the USDA, feed mills and crushers in the Brazilian state of Paraná were reportedly eager to continue importing Paraguayan beans in recognition of their quality and favourable logistics.

Exports to the European Union (EU) have fallen in recent years, due to US soyabeans becoming more competitive, the report adds, but this trend could reverse as more US beans flow to China.

Russia, meanwhile, continues to be an important buyer of lower-quality Paraguayan beans, according to the USDA.

Key waterways

Around 80% of Paraguay’s trade moves through inland watercourses, according to a Bloomberg report on the region in April.

Paraguayan soyabeans are barged down the Paraguay or Paraná rivers to ports.

In normal circumstances, approximately 35-40% of Paraguayan river barge exports are loaded at facilities on the Paraná River with the remainder loaded on the Paraguay River, according to the USDA.

Very low rain levels in the Paraná River basin last year made some sections of the river impassable, the GAIN report says, and exporters had to transport soyabeans from storage and processing facilities on the Paraná to ports on the Paraguay River.

“When water levels on the Paraná River are normal, soyabeans grown in eastern Paraguay can be loaded onto barges and shipped downriver. However, when low water levels make these shipments impossible or uneconomical, trucking soyabeans to Brazil can make more sense than shipping overland to ports on the Paraguay River,” the GAIN report says.

Although rains across the region had raised water levels near the Argentine port complex in Gran Rosario, the river basin that fed the portion of the Paraná River that borders Paraguay had seen less rain, and dam operators in Brazil had sought to retain more water in reservoirs, according to the GAIN report. This meant that low water levels continued to affect port operations on the Paraná River.

The Paraguay River has more stretches of sandy bottom which facilitates dredging operations. However, even on the Paraguay River, loads had to be reduced by 20%-30% to clear specific low points, according to the report.

A series of actions have been taken by the Paraguayan government to resolve the situation – including a number of dredging projects and the release of water from Itaipu Dam which is located on the Paraná River on the border between Brazil and Paraguay – but exporters were pushing for further improvements to navigability, particularly across certain chokepoints, and the introduction of new tolls to fund the improvements, according to the report.

Freight benefits

Low water levels on the Paraná River had one positive consequence – an improvement in trucking economics, according to the GAIN report.

Outside of the busy harvest season, freight rates for Paraguayan truckers were competitive compared with Brazilian truckers and Mercursor rules allowed soyabeans to cross the border easily and tariff free, according to the USDA.

Future outlook

Exports from Paraguay to Argentina are channelled to its large processing sector, where they are blended with local supplies and crushed and then sold internationally as soyabean products, the IGC’s Cooper explains.

“With economic uncertainties meaning that Argentine farmers have been reluctant sellers at times in the current season, this is expected to ensure demand for Paraguayan supplies holds firm,” he says.

Paraguay’s domestic processing sector has also grown over the past decade, Cooper adds.

However, domestic uptake is relatively small, with the bulk of its supplies of soyabean meal and soyabean oil sold internationally.

Rural sectors have also been urging the government to negotiate with Chinese authorities to open up this market for Paraguayan soyabean exports, according to an AgriCensus report last year.

With recent reports indicating that there would be increasing difficulties in moving soyabeans due to continuing low water levels, logistical challenges are likely to be the defining issue over the remaining months of the marketing year, according to Cooper. ●