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Argentina port strikes

03/15/2012 @ 10:59am

Argentina's grain exporters are gearing up for a tense strike season this year as workers press for steep pay raises amid double-digit inflation.

An expected series of strikes will delay many shipments, but the overall effect on international grain markets is expected to be muted.

"The grain will still go out, but it's going to be delayed," said Lorena D'Angelo, analyst at agricultural services firm fyo.com.

A strike would have to extend 20 days or more before global buyers are likely to shift purchases to the U.S. instead of Argentina, said Terry Reilly, analyst with Citigroup in Chicago.

Argentina is the world's second-largest corn exporter, leads soymeal and soyoil exports, and ranks third in soybean shipments.

"Given U.S. prices for beans, meal and especially soybean oil are trading at a premium to South America, importers will likely wait for the South American shipments and avoid turning to the U.S. as long as they can," Reilly said.

China bought 80% of Argentina's soybean exports last year, while the country's leading soymeal customers were Indonesia, Vietnam, Algeria, the Philippines and South Africa.

Argentina's corn and soybean harvests kick off in March, with long lines of trucks snaking their way across the farm belt to unload their cargo at the ports clustered around the city of Rosario on the banks of the Parana River.

The next few months are when unionized truckers, stevedores and workers in the massive oilseed crushing mills at the ports have the greatest leverage over employers who are under the gun to get the boats loaded and out to sea fast.

In the end, the cost of those delays will be passed on to farmers, many of whom saw corn yields dented by drought conditions in December and January, D'Angelo said.

But the big grain export companies are also wringing their hands as labor unrest at the ports can be very expensive.

"None of these costs are planned for," said an executive at one of the country's leading grain export companies.

Exports are dominated by many of the leading international grain brokers, including Louis Dreyfus SA, Noble Argentina, Nidera, Vicentin, and the local units of Bunge Ltd. (BG) and Cargill Inc.

"It affects us to have boats stalled and having to pay their daily costs, it affects us to not be able to comply with our shipping commitments and to be fined by the buyers, it affects us because we have a bunch of money tied up and we can't collect because of late delivery and finally when the strikes are extended it puts our processing capacity at risk due to logistical problems," the executive said.

Ports in the greater Rosario area have already suffered their first major strike of the season.

On Tuesday, the merchant marine union, SOMU, suspended a strike that had dragged on for almost two weeks. SOMU and employers have agreed to a 10-day negotiation period, with the union pressing for shorter shifts and more people on the payrolls.

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