Venezuela to channel scarce diesel to farmers

Venezuela is crafting an emergency plan to guarantee diesel supply to farmers but with reduced price subsidies.

Oil minister Tareck El Aissami and agriculture minister Wilmar Castro have been tasked with ensuring up to 30,000 b/d of low-sulfur diesel to farmers and livestock producers within two months, at still-undefined international prices. The plan would set supply quotas for sub-sectors such as vegetable and grains production and establish dedicated service stations in farm states.

The Fedenaga livestock federation and Fedeagro farming federation welcomed the plan as a step in the right direction but warned that Venezuela could exhaust its remaining low-sulfur diesel stocks within two weeks.

"The government should have developed and executed this plan in January but it focused instead on repairing PdV's refineries and enforcing a fuel rationing plan that made no distinction between the needs of strategic sectors like food and livestock production and urban transport," a senior oil ministry official said.

Venezuela was historically self-sufficient in oil products. But systematic neglect of state-owned PdV's refineries, giveaway pump prices, US sanctions and chronic smuggling and corruption have left most fuel tanks near empty.

The situation started to deteriorate further late last year when the former US administration cut off a sanctions exception in which non-US companies swapped Venezuelan crude for low-sulfur diesel. The controversial move has drawn widespread criticism for the fallout on power generation, public transport and food supply.

Stalled tractors

Up to 90pc of Venezuela's farm machinery is curently grounded for lack of diesel, according to the agriculture ministry. In some farming areas, diesel is available only on the black market for up to $4/liter, according to Fedeagro. In western border states, the fuel is smuggled in from Colombia.

Since January, tens of thousands of tons of fresh produce grown mainly in the Andean states of Merida, Tachira and Trujillo and staples like rice and yellow corn from Guarico and Portuguesa states have rotted because farmers could not transport their goods to urban markets and grain-processing plants, a Fedeagro official tells Argus. And a Fedenaga official says raw milk has spoiled because it cannot be trucked to pasteurization centers.

PdV officials in Caracas are privately skeptical that the government's supply plan for farmers can achieve its intended goal of relieving food shortages in Caracas and other cities.

"We've restarted some diesel production at the Cardon and Amuay refineries, and at the Puerto La Cruz refinery since the end of March, but the overall quality of the around 50,000 b/d of diesel we're currently producing is uneven and sulfur content is too high," a PdV downstream official said. "Dirty diesel is damaging truck motors and farm machinery that can't be repaired because sanctions have blocked imports of spare parts."