(S&P Global, 30.Mar.2022) — YPF, the biggest oil producer and refiner in Argentina, said late March 29 that it is taking steps to meet farmers’ diesel demand during the spring harvest of major export crops, as concerns swell of shortages.
The state-backed company said that through its more than 100 wholesale distribution centers across the country, it “guarantees access to diesel for farmers,” according to a statement.
YPF, which supplies 56% of the diesel in Argentina, put out the statement as concerns grow among farmers, truckers and other diesel consumers that supplies will run short over the next few months, a period of high demand for bringing in corn, soybean and sunflower crops, much of which is exported.
YPF said logistics challenges have stoked the concerns of challenges, not the lack of supplies.
Grade-two diesel consumption at retail outlets rose 12% in the first two months of this year compared with the year-earlier period, it said, citing government data. Over the same period, sales via wholesale channels like the agriculture distribution centers fell 2.5%, YPF added.
“This indicates a slight migration of wholesale consumers to the retail channel and this complicates the logistics requirements,” YPF said.
YPF added that it is stepping up its logistics efforts to guarantee supplies to all of its sales points even despite difficulties in sourcing supplies in “an international context of diesel scarcity.”
On March 29, a trade group for retail fuel outlets said some stations have started rationing diesel sales because government price controls and import restrictions are discouraging refiners from bringing in enough supplies. The group, called the Confederation of Hydrocarbon Entities, or Cecha, said these are “the first signs of shortages,” calling on refiners and the government to make efforts to increase supplies.
One cause of the shortages is that government controls are keeping diesel prices 30% below import prices, a discouragement for refiners to import supplies to meet the rise in demand. At the same time, oil producers have been increasing crude exports to take advantage of strong international crude prices. Brent — the reference price used by Argentina — has surged to more than $100/b since Russia invaded Ukraine at the end of February, up from $77-$94/b in the two months before that.
Indeed, Argentina’s crude exports in dollar terms shot up more than 200% to $625 million the first two months of this year from $206 million in the year-earlier period, according to Indec, the state statistics agency.
This has forced refiners, which are running their refineries at 10%-15% below capacity, to double their diesel imports to meet demand this year even as international prices run high on tight supplies. Diesel imports in dollar terms shot up more than 1,900% to $498 million year-on-year in the first two months of this year, according to Indec.
These numbers are stoking fears of shortages among farmers.
Nicolas Pino, president of the Argentine Rural Society, an agricultural trade group, called on the oil sector and the government to work on an “immediate solution” so that farmers have enough diesel.
“We cannot face a harvest with supply problems for this key input,” he said on Twitter.
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