Engineering News

Energy crunch hits Argentina's farming sector
Tue Jun 26, 2007 6:42pm ET

BUENOS AIRES, June 26 (Reuters) - An energy crisis is hurting Argentina's agricultural sector as electricity, fuel and fertilizer become more scarce, analysts and industry executives said.

Some wheat mills have been forced to slash production while fertilizer plants have been idled temporarily as the government rations electricity and natural gas to big industries during the southern hemisphere's frigid winter months.

The shortage of diesel, widely used in the farm sector, has slowed harvesting of soy and corn plantations, and it is also affecting wheat sowing.

"So far we've been able to overcome the snags. But if this continues, we're going to have serious problems," Ricardo Baccarin from agricultural consultancy Panagricola told Reuters.

Argentina is the world's largest exporter of soyoil and soymeal, and the third-biggest exporter of soybeans. The South American country is also the second-largest exporter of corn and among the top five exporters of wheat.

The Argentine government started ordering the periodic rationing of natural gas to large industries in late May, to ensure homes had enough gas-heating during the winter months.

A cold spell in the South American country, with near freezing temperatures some days, has put further demands on the country's already-stretched energy supplies.

The problem stems from the country's rapid economic growth -- at over 8 percent a year -- since hitting rock bottom during a devastating economic crisis in 2002.

President Nestor Kirchner has blamed the energy woes on the lack of investment in the sector.

Argentina increasingly depends on imports of natural gas from neighboring Bolivia for power generation and other uses.

But energy analysts in Bolivia, which nationalized its natural gas-rich industry last year, say the country does not have enough gas to increase exports at this time.

Although the temperature has risen in the past few days, the government has stepped up pressure on big businesses to slash energy consumption.

WHEAT, THE WORST HIT

The shortages of electricity and natural gas have forced wheat mills to cut output.

"The past few days we have had to stop the mill for 8 hours (a day). This is a mill that usually works nonstop for 24 hours ... having to cut down affects the cost (of production)," said a wheat milling executive who asked not to be named.

The shortage of natural gas is also having a negative effect on production of urea, an nitrogen-based fertilizer widely used by wheat and corn farmers.

An executive from fertilizer maker Profertil, which is controlled by Spain's Repsol YPF and Canada's Agrium, said one of the company's plants had to halt production for about 10 days.

"It has been halted since June 15. Now we've been told that we can start operations again ... but the start-up process takes 48 hours and we don't know whether we are going to have to stop again," the company official said on condition of anonymity.

According to the Buenos Aires Grain Exchange, the shortage of fertilizer and dwindling diesel supplies are delaying wheat sowing in some areas.

And all of this is happening early in the winter season, with analysts predicting the situation could worsen once the cold settles in.

Source: Reuters

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