Diesel gap compounds Venezuela’s farm woes

Faint hopes that Venezuela would revive agricultural production this year for the first time in over a decade have been dashed by a diesel shortage and other structural problems.

Venezuela's worsening diesel deficit has had a "devastating impact" on production of corn, rice, sorghum and other grains and oilseeds, agricultural chamber Fedeagro says.

Unlike gasoline which is now chronically hard to find in Venezuela, diesel had been more widely available until recently because of an exception to US sanctions that allowed non-US companies to swap Venezuelan crude for diesel with Venezuela's state-owned oil company PdV. The former US administration closed off the exception at the end of 2020. Even before the swaps cut-off, the Venezuelan government had been prioritizing diesel distribution to urban areas and thermal power generation at the expense of agricultural activity.

Farmers use diesel for tractors and other equipment, and for some distribution to markets.

Fedeagro president Aquiles Hopkins said 2020 "was a tragic year for Venezuela's decimated agricultural production, but the lack of fuel this year has hyper-complicated the situation faced by farmers."

PdV produces some gasoline and diesel, but far less than the market demands. And in the case of diesel, PdV's supply is high in sulfur, which can damage some equipment meant to operate on low-sulfur grade.

Fedeagro board member Ramon Bolotin says Venezuela's agricultural sector currently receives less than 20pc of the diesel supplies needed to power harvesting equipment and trucks to transport grains to agro-industrial processing centers and market centers.

While agricultural ministry data is years out of date, Fedeagro says overall production measured by cultivated acreage and crop numbers has contracted to levels recorded in 1958.

Venezuela's annual demand for staple corn averages over 1.5mn t/yr for white corn and more than 2.5mn t/yr for yellow corn, according to Fedeagro.

In the most recent May-November harvest cycle, Venezuela produced 480,000t of white and yellow corn combined, barely 12pc of estimated national demand. But the crop surpassed Fedeagro's forecast of 350,000t, spurring hopes among some producers that further growth would be achieved in 2021.

The expectations were based on government and PdV assurances that the company would progress in repairing its refineries. But PdV's ongoing repair activities are only yielding about 50,000 b/d of gasoline and 40,000 b/d of diesel.

A senior oil ministry official tells Argus that Venezuela requires at least 110,000 b/d of gasoline and 100,000 b/d of diesel to sustain "minimum volumes needed for the economy to operate with a reasonable degree of normality."

The government of President Nicolas Maduro regularly blames US sanctions for creating hardship by impeding oil exports and imports of oil products and spare parts for PdV's refineries.

Although US sanctions do not prevent Venezuela from importing food and medicine, Venezuela says the oil and financial sanctions have eroded hard currency for critical imports, including wheat. Venezuela relies on imports for over 95pc of its wheat requirements.

While a diesel deficit is the main challenge facing farmers, other structural problems include unstable electricity supplies and shortages of quality seeds and fertilizer inputs, according to Fedeagro.

The Fertinitro urea and ammonia plant in the Jose industrial complex is only partially operating.

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