Exporters say if any GM wheat is shipped from Argentina, all international sales of the grain may be shunned due to concern about possible cross-contamination from GM to non-GM cargoes, given some consumers’ aversion to bread made with GM flour.

Argentine biotech firm Bioceres said in September that 55,000 hectares of its GM drought-resistant HB4 wheat had been planted by farmers in Argentina in what it called “an inventory ramp-up” ahead of “expected pending regulatory approval from Brazil.”

It said the GM wheat was being grown by 225 farmers, concentrated in the breadbasket province of Buenos Aires. A company spokesperson reached by Reuters declined further comment.

The CIARA-CEC chamber of grains export companies operating in Argentina said the information provided was not detailed enough. Its head Gustavo Idigoras said the chamber had asked the National Seed Institute, a government body, last month to help pinpoint farms that are growing GM wheat.

“If we can identify risk areas… we will avoid purchasing there. We will also test wheat coming into port terminals. Any detection of GM wheat will result in it being rejected,” Idigoras said.

“We are not against biotechnology. We are very positive about biotechnology for corn and soybeans. But we need to be very careful until the market approves it for wheat,” he added.

Maintaining exports is crucial for Argentina as tightening global wheat supplies and robust demand pushed benchmark Chicago Board of Trade wheat futures to the highest level in nearly nine years this month.

Brazil imports 60 per cent of the wheat it consumes, with 80 per cent of those imports coming from Argentina.

Its biosecurity agency CTNBio could decide whether to approve a request to allow imports of Argentina’s GM wheat at a meeting it has scheduled for Thursday.

It is a contentious issue, with Brazilian flour millers threatening to stop buying from Argentina if CTNBio grants permission for the imports.

If and when Brazil approves shipments of wheat produced by Bioceres, it would also be allowed to be sold domestically, the Argentine government says.

Argentine farmers, whose 2021-22 wheat crops have benefited from better-than-expected rain so far this season, are watching the story carefully. With concern mounting about global warming, drought-resistant wheat promises to bolster crop yields.

“If Brazil accepts GM wheat, it would require a separate supply chain. But it would be very difficult to have two chains with no cross-contamination,” said David Hughes, a grower in Buenos Aires.

He has 900 hectares of wheat on his farm that he plans to harvest in December.

“It would be a big plus going forward to have technology in our wheat that makes it more resistant to drought. The question is whether on not there will be a market for it,” Hughes said.

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The decision may spur a broader global discussion about genetically modified wheat as prices rise and concerns grow that more severe weather could threaten food security. Genetically modified (GMO) soybeans and corn have long been accepted on global markets, but are primarily fed to livestock rather than humans.

Brazil’s biosecurity agency CTNBio said its unanimous decision applied only to wheat flour. Millers had threatened to boycott Argentine grains and said they would seek legal recourse to reverse the flour decision.

“The decision was by a technical agency, but it is important to see what the Brazilian market wants. It looks like consumers in Brazil do not want GMO wheat,” said Gustavo Idigoras, head of Argentina’s CIARA-CEC chamber of grains exporters.

Brazilian flour milling association Abitrigo said it would ask the president’s office to convene a national biosecurity committee to review the decision. It said it was also evaluating legal options to suspend the ruling.

The group had already threatened to stop buying Argentine wheat if sales of the drought-resistant wheat were approved in Brazil, vowing to turn to other countries for supplies.

“It could mean a surge in demand for U.S. wheat if they reject buying it if they fear consumer backlash,” said Arlan Suderman, chief commodities economist at StoneX. “Ultimately, it comes down to the consumer. What is the consumer willing to accept?”

U.S. wheat futures hit their highest in nearly nine years on Thursday due to tight global supplies, while European wheat futures climbed to a 13-1/2 year peak.

U.S. Wheat Associates, which promotes U.S. wheat exports, did not have an immediate comment. The group has previously said it will support commercialization only after approval in major markets and the creation of rules for handling low levels of GMO wheat mixed in with non-GMO wheat.

Just a fraction of Argentine farms have tried out the wheat variety resistant to drought and the common herbicide ammonium glufosinate developed by Bioceres SA, whose partner Tropical Melhoramento Genetico filed the request with CTNBio.

A source at Bioceres said it would seek approval from other key markets before seeking to market the GMO wheat commercially.

Some 55,000 hectares (135,910 acres) in Argentina have been planted with the GMO wheat on an experimental basis, company disclosures show.

Argentine grains exporters have asked the government to identify which farmers are growing the GMO wheat so they could stop buying from those areas.

Santiago del Solar, who grows wheat in the bread-basket Argentine province of Buenos Aires, said the ultimate decision remains in the hands of Brazilian millers and consumers.

“It’s fine that the regulators said yes, but we sell wheat to the milling industry and consumers. If they don’t accept GMO wheat, we still have a big, big problem,” del Solar said.

Argentina exported a total of 8.424 million tonnes of wheat through Oct. 19 this year, with some 50 per cent going to Brazil, which relies on its southerly neighbour for most of its wheat imports.

Argentine farmer Francisco Santillan, who also grows wheat in the province of Buenos Aires, said he will wait to see whether other countries approve imports of the wheat variety before he starts planting it.

“I think the reasonable thing to do, no matter how much Brazil accepts it, is to wait a year to see how the issue evolves in other countries that buy wheat from us,” he said.

— Reporting for Reuters by Ana Mano in Sao Paulo, Hugh Bronstein and Maximilian Heath in Buenos Aires and Mark Weinraub and Julie Ingwersen in Chicago.

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For decades, cargo ships have paid tolls directly to the private dredging company in charge of keeping the river open.

Industry executives worry that government intervention in the waterway will heap bureaucracy and extra costs on the grains export sector, which is the main source of hard currency needed to refresh central bank dollar reserves strained by a three-year recession exacerbated by the COVID-19 pandemic.

Grains powerhouse Argentina is the world’s No. 3 corn exporter and top supplier of soymeal livestock feed, used to fatten hogs and poultry from Europe to Southeast Asia.

The National Ports Administration has been given authority over the next 11 months to subcontract management of the waterway, while the transportation ministry evaluates bids from dredging companies for the long-term concession to follow.

“The strengthening of policies on the management of inland waterways is a priority objective of the national executive,” the government said in a decree published on Wednesday.

The tolls paid by ships for dredging services performed by the company that wins the upcoming Parana contract will be received by the newly established agency, the decree said.

“This decree looks like the government does not only want to set up conditions for the tender and the dredging tariff. It looks like an excess of bureaucracy that might mean additional costs for export operations on the river,” said Gustavo Idigoras, head of the CIARA-CEC export companies’ chamber.

“We welcome the idea of having a control agency, but we are concerned about additional bureaucracy and costs. So we need to have close conversations with the government,” Idigoras said.

A transportation ministry source, who asked not to be named, said the new dredging oversight board could actually make it less expensive to ship grains from Argentina.

“The price of tolls paid by cargo ships to the dredging company is something that will be determined in the bidding process. The tolls could end up going down,” said the source. “One of our objectives is to lower logistics costs.”

This is the latest chapter in a long saga of farmers and exporters opposing government intervention in the sector.

The dredging of the Parana gives Argentina an edge over rival exporters Brazil and the U.S., which rely more on less efficient trucks and slow-moving barges.

The new agency has inflamed exporters and farmers already worried about the policies of centre-left President Alberto Fernandez, a Peronist whose administration has curtailed beef exports as a way of controlling domestic food price inflation.

The industry is fretting that if the flow of toll money goes through the state, it would dilute and increase dredging costs.

The river at Rosario is dredged to about a depth of 10 metres, and industry leaders want the next long-term contract to provide for a deeper, wider shipping channel.

— Reporting for Reuters by Hugh Bronstein and Maximilian Heath.

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Dryness in Brazil, where the Parana originates, has diminished cargo traffic and sparked worries by environmentalists about dredging the river below certain depths. The dryness has reduced the amount of cargo that can be carried by ships at the height of the Argentine corn and soy export season.

“Handymax ships are leaving port with 9,250 tonnes less cargo than normal and Panamax ships 11,350 tonnes less,” Guillermo Wade, manager of Argentina’s Chamber of Port and Maritime Activities (CAPyM), said in an interview.

About 80 per cent of Argentina’s agricultural exports are shipped from Rosario ports and down the Parana, out to the Atlantic.

“In normal times the sailing draft at Rosario is 10.51 metres, or 34 feet and six inches. Today we are sailing at 8.96 metres, or 29 feet and four inches. We are five feet two inches below normal sailing draft,” Wade said.

To keep the river’s depth at 34 feet, as contracted with the government, Parana dredging firm Jan de Nul has to pull increasingly massive amounts of mud from the river bottom.

But activists represented by the Argentine Association of Environmental Lawyers (AAdeAA) say this can dry out nearby wetlands and hurt aquatic life by lowering water oxygen levels, as well as affect water used locally by humans.

The company declined to comment. The government did not respond to a request for comment.

Dredging of the river makes the country one of the most efficient international grain suppliers. It is the world’s No. 3 corn exporter and top supplier of soymeal feed used to fatten hogs and poultry from Europe to Southeast Asia.

“It is not our intention to confront the agro-export sector, but rather for the sector to once and for all understand that it cannot destroy the most important river basin that our country has, after it has been in a state of absolute fragility in recent months due to low water levels,” Lucas Micheloud, a member of the AAdeAA, told Reuters in an interview.

The shallowness of the Parana threatens to cost the country’s grains farmers and exporters almost $315 million over a six-month period through August, the Rosario grains exchange said last week.

“The regional climatic trend shows a water scenario below normal, at least until September of this year. Levels in July could approach historic lows,” reached in 1944, the National Water Institute of Argentina said in a recent report.

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The South American grains powerhouse is the world’s No. 3 corn exporter and top supplier of soymeal livestock feed, used to fatten hogs and poultry from Europe to Southeast Asia.

“Most of Argentina’s agricultural area will see little to no rainfall,” the Buenos Aires Grains Exchange said in a report about the first half of April.

That’s good news for farmers now starting to bring in their 2020-21 corn and soybeans. While key to crop development, rain makes it hard to move heavy harvesting combines over wet ground.

March’s storms arrived too late to help yields in areas pounded by hot, dry weather from mid-2020 through February. Late-planted soy was especially hard hit by dryness.

“Since around mid-March there should have been no more damage from dryness, and even some late-stage improvement to yield potential,” said U.S.-based Isaac Hankes, an analyst at Refinitiv, the financial and risk business of Thomson Reuters.

“The forecast shows dryness returning, which should be well timed for the harvest and is in line with long-term expectations from our April-May outlook,” Hankes added.

Argentine corn starts getting planted in September, with harvesting through July. Soy season is October through May.

The Rosario exchange chopped its soy harvest forecast to 45 million tonnes from a previous 49 million tonnes, citing months of high temperatures and scant rainfall. And the Buenos Aires Grain Exchange cut its soy crop forecast to 44 million tonnes from a previously projected 46 million tonnes.

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Trucks owners grouped in the informal TUDA association (Transportistas Unidos de Argentina) began blocking highways last month, making it particularly hard for barley to reach export terminals in the Buenos Aires port of Necochea.

“There were two China-bound Panamax vessels at Necochea port waiting to load. The buyers were worried because they need malting barley by the end of February,” said Argentine barley market consultant Agustin Baque.

“If the strike continued, the buyers would have had to switch to another supplier, like Canada or France,” he said.

China is scooping up millions of tonnes of barley from France, Canada and Argentina to feed livestock, as shipments from China’s usual barley supplier, Australia, have fallen victim to a trade fight between the two countries.

The Argentine drivers were protesting what they called high taxes and highway tolls, as well as low pay and fast-rising fuel costs in the inflation-racked country. TUDA spokesman Santiago Carlucci told local media that the protest had ended.

He could not be reached for comment, but the CIARA chamber of export companies and the Bahia Blanca grains exchange confirmed that the protest had ended.

Argentina’s main agricultural export hub of Rosario was not heavily affected by the truckers’ protest. Local authorities in Rosario did not allow strikers to block roads near the city.

Most of Argentina’s corn and soy, the country’s top two cash crops, are shipped from Rosario. The barley belt is in southern Buenos Aires province, far from Rosario, making Bahia Blanca and Quequen Argentina’s main transit points for the grain.

The strike started bogging down operations at the port on Jan. 19, said Eugenia Rul, head analyst at the Bahia Blanca grains exchange.

“In the affected period, 388 trucks entered the port, equivalent to approximately 11,640 tonnes of grain. In the same period last year, 7,654 trucks entered port carrying 229,620 tonnes. The drop was 95 per cent,” she said.

— Reporting for Reuters by Hugh Bronstein and Maximilian Heath.

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Months of hot, dry weather have put the country’s two main cash crops at risk. Argentina is the No. 3 international corn supplier and the world’s top exporter of soymeal livestock feed used to fatten hogs and poultry from Europe to Southeast Asia.

The Rosario grains exchange has estimated Argentina’s 2020-21 corn crop will be 48 million tonnes. But the dryness has put that target at risk, according to Federico Di Yenno, a senior analyst with the Rosario grains exchange.

“With these weather conditions it is difficult to continue to assume that yield development will be normal, resulting in a corn crop of 48 million tonnes,” Di Yenno said.

The exchange expects a soybean crop of 50 million tonnes this year, although soy yields are expected to be affected by dryness as well. Argentine soy harvesting starts in March while corn starts being collected in April.

In the last two weeks, above-normal temperatures and insufficient rainfall worsened the soil moisture profile in many parts of Argentina’s main Farm Belt, according to Di Yenno.

“In the next 15 days the critical period of corn crop development begins, so an accumulated 120 to 140 millimetres of rain is needed for optimal development,” Di Yenno said on Jan 7.

“The weather forecast is not encouraging since the accumulated rainfall for the next 15 days does not exceed 60 millimetres in the region that needs the most water,” he added.

In the following days regional rains were expected to hit some croplands around the breadbasket province of Buenos Aires, and those rains will expand to other areas through the 10-day forecast, said U.S.-based Isaac Hankes, a weather analyst at Refinitiv, the financial and risk business of Thomson Reuters.

“However, some central regions (La Pampa through Cordoba/Santa Fe) will remain drier than normal,” Hankes said.

“While some negative dryness impacts will persist regionally, it does not look like a scenario of widespread Argentine drought in January,” Hankes added.

Local farm analyst Pablo Adreani, of the Buenos Aires-based AgriPAC consultancy, was less optimistic.

“The situation in Argentina is very dramatic. There are forecasts showing dryness persisting through January,” he said.

“If it does not rain in abundance and over wide areas, the situation will get more and more critical, causing crop losses for both corn and soy,” Adreani added.

The soybean market has transitioned into “rationing mode” as tight global supplies and crop-stressing drought in Argentina have ignited the strongest soy market rally in years, Joe Stone, the head of Cargill Inc.’s agricultural supply chain, said Jan. 6.

“We are going to need to ration. The extent of how much we’re going to need to ration is probably going to be a function of the weather that we see in Argentina,” Stone said during a webinar hosted by the U.S. Soybean Export Council.

He did not provide any details about how that rationing would occur.

Global grain and oilseed prices have soared as China and other global buyers accelerated purchases due to food security concerns and shrinking supplies amid adverse weather in South America and other crop-producing areas around the world.

Argentina last month suspended corn export sales until March to conserve domestic supplies, and Russia imposed duties on wheat and soybean exports amid concerns about rising domestic food prices.

Top soy importer China has booked record soy purchases this season. Record shipments from Brazil have also prompted the top soy exporter to import beans from the United States.

The shift from a global crop surplus over the past several years to the tightest supplies in at least seven years have sent benchmark U.S. soybean futures prices on the Chicago Board of Trade to 6-1/2-year highs.

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The deal, following a more than 10-hour negotiation session hosted by the Labor Ministry on Tuesday, includes a two-part 25% increase in salaries from January to August. Increases for the rest of the year are to be determined by the inflation rate.

“We have reached an agreement in general terms and that for this reason the strike has ended,” said a statement issued on Wednesday by the SOEA oilseed workers’ union.

“Activities are normalizing as of the start of the first shift of today, and that work schedules at every plant are back to normal,” the union said in the statement.

Andres Alcaraz, spokesman for the CIARA chamber of soy crushing companies, confirmed that plants were back up and running.

Argentina’s oilseed workers’ federation said in a statement late Tuesday that the deal “means the triumph of the strike for a living wage that ensures a dignified life for each worker and their families.”

Chicago Board of Trade soybean futures had been affected by the work stoppage. Workers went on strike over wages that they said did not fully compensate them for Argentina’s high inflation rate and the risk of working during the COVID-19 pandemic. Argentina is a major corn, wheat and soybean supplier.

The strike had affected operations of international agro-giants such as Cargill Inc, Bunge Ltd and Louis Dreyfus Co, and sent soybean prices skyrocketing to six-year highs on the Chicago exchange.

The Urgara union representing port-side grains inspectors continued their strike, which also started on Dec. 9. The labor group is expected to meet with the CPPC private ports chamber later on Wednesday to try to hammer out a wage deal.

“Let’s hope we can reach an agreement” with the companies, said Juan Carlos Peralta, Urgara’s press secretary.

Urgara has a great impact on southern ports of Bahía Blanca and Necochea. However, Argentina’s main agricultural ports hub of Rosario, on the Parana River, uses a lot of non-union grains inspectors. About 80% of Argentina’s agricultural exports flow through Rosario.

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The CIARA-CEC chamber of soy byproduct manufacturers will meet on Tuesday with the two main unions representing oilseed workers to try and hammer out a 2021 compensation package.

“We seek an agreement with the unions that allows the efficient, reliable and safe operation of our factories and ports,” said CIARA-CEC chief Gustavo Idigoras.

Asked how many cargo ships have been unable to load due to the strike, he said: “More than 140.”

The Argentine government, desperate for a deal that would jump-start agricultural exports and revive much-needed foreign exchange inflows, is sponsoring Tuesday’s talks. The negotiations will be overseen by the Labor Ministry.

Both sides in the wage talks accuse the other of intransigence. “We will continue the strike. We are firm in our position,” said Daniel Succi, an official with the SOEA oilseed workers’ union.

CIARA-CEC has offered a 25% raise to come in three phases through August, when another increase through the end of the year would be based on inflation. Workers want a one-shot 25% increase through August.

Argentine inflation was 35.8% in the 12 months through November, according to official data.

Also at issue is a bonus to be paid as compensation for working through the COVID-19 crisis. CIARA-CEC has offered a 70,000 peso (about $840) bonus while the unions say they need a one-off payment of 130,000 pesos, CIARA-CEC says.

In addition to the special COVID-19 bonus, the labor group is demanding that workers’ regular yearly bonus be 35% higher than last year’s bonus, plus a guarantee that workers will be paid for the days they spent on strike.

Members of the Urgara union representing port-side grains inspectors, who negotiate their contracts with the country’s CPPC private ports chamber, have also been on strike since Dec. 9. “We have not had any dialogue. Everything remains the same,” an Urgara spokesman told Reuters.

Argentina is the world’s top supplier of soymeal livestock feed used to fatten hogs and poultry from Europe to Southeast Asia. But few if any soybean cargo trucks have unloaded at port terminals during the strike, bogging down the sector that serves as Argentina’s main source of foreign currency.

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The South American grains powerhouse is a major exporter of soybeans and the world’s top supplier of soyoil and soymeal.

The government last week cut export tax rates on soy and its byproducts until the end of the year in a move to encourage more exports and raise much-needed dollars. With prices rising, farmers had been holding on to soy crops waiting for a better time to sell.

The rate cut was deeper for processed soyoil and meal than for soybeans, which had all previously been at 33 per cent. Tax rates dropped this month and will gradually rise again, though soymeal and oil will end up with a two-point cut and raw soybeans none.

The aim: get farmers to empty their bins of beans, pumping up exports and replenishing central bank reserves of foreign currency that have dipped to critical levels amid a biting recession exacerbated by the COVID-19 pandemic.

Farmers, however, are less than convinced. A major farm organization has already said the cuts are insufficient.

“We will continue to hold on to crops and sell only when we need cash,” said Eduardo Bell, a farmer in the breadbasket province of Buenos Aires.

Luis Miguel Etchevehere, former head of the Argentine Rural Society growers’ group and farm minister under conservative former president Mauricio Macri, said the tax differential was akin to a “subsidy” for the crushing sector over farmers.

“It is not fair that one part of the production chain be forced to give up its competitiveness for the sake of another part of the same chain,” he told Reuters.

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