Record drought hits Argentina’s economy

Argentina, the world’s largest exporter of processed soy and the third-largest for corn, is grappling with a severe drought that is jeopardizing the country’s economy. The drought is the worst in 60 years, resulting in sharp reductions in soybean and corn harvest forecasts. On Thursday, the Buenos Aires grains exchange revised down its soy production outlook to 27 million tonnes, the lowest since the beginning of the century. Farmers could face losses of $14 billion, with soy, corn, and wheat production potentially reducing by 50 million tonnes. “It’s unprecedented that the three crops fail.

The drought has worsened Argentina’s economic crisis, heightening fears of default and putting at risk targets agreed with the International Monetary Fund (IMF). It comes as the country prepares for crucial general elections in October, battles 99% inflation, and faces large repayments to bondholders and the IMF. The drought is a significant setback for the country, which relies heavily on grains as its main export, and plans to replenish depleted foreign currency reserves are stalling. This has prompted discussions with the IMF to ease reserve accumulation targets for the year, with GDP forecasts being revised down.

Argentina has suffered from at least eight heatwaves in the 2022/23 season, with the drought affecting farmers in some areas since May 2022. The drought has been compounded by high temperatures linked to climate change. Soy and corn forecasts could worsen further if rains do not come, warned the grains exchanges. Soy forecast by the Rosario exchange is already at its lowest since the 1999/2000 season, and the anticipated yield is the worst since 1996/97. Farmers are anxious, with some predicting less than half the expected harvest.

Luis Zubizarreta, head of the commercial ports chamber and soybean industry body, described the situation as “dramatic” and warned of its impact on Argentina’s entire economic situation and foreign currency income. Zubizarreta added that the flow of grains at ports is historically low due to a lack of merchandise. The drought is an unprecedented climatic event, Calzada said. Meanwhile, farmers are hoping for rain to help them mitigate their losses.