Alarming drought in Argentina: for the new 2022/23 campaign, a drop in grain production is expected
Argentina is facing one of the worst droughts in its history: almost 55% of the territory's surface is affected by lack of rain or in conditions of water stress. The high temperatures and the lack of rainfall between the months of September and December have caused a great deterioration of crops. The economic consequences are beginning to be felt in various crops, but all eyes are on soybeans, the country's main export product.
A 25% drop in production is already estimated compared to the 49 Mt expected with a normal climate scenario in December 22. 12 Mt of the oilseed are already considered lost and it is estimated, with 37 Mt, that it will be the third worst Argentine harvest in the last 15 years, in addition to being the driest campaign in more than 60 years.
The short, medium and long-term scenarios are adverse for the country and it is feared that the next harvest will leave the 2022/23 cycle with the worst production figure in this data series.
With this estimated volume (37 Mt) there will be almost 13% less harvest than a year ago, a harvest also affected by the lack of water. It is estimated a national yield of almost 24 qq/ha (2.4 tn/ha) and an area that will not be harvested at 504,000 ha. It is noted that area losses, especially in second-rate soybeans, can skyrocket and become massive if there is no imminent help from significant and widespread rains.
From the Buenos Aires Grain Exchange, they confirm that this year they expected a gross agro-industrial product equivalent to US$ 49,094 million, and that their updated projections propose two possible scenarios: (A) a 21% decrease in the best of cases, totaling US$42,136 million. But in the worst scenario (B), this cut could extend up to 30% and only reach US$ 37,418 million. Thus, 6,958 million could be lost in the first scenario and 11,676 million in the second, respectively.
The drought will have a direct effect on exports. Although the Buenos Aires Grain Exchange was already contemplating a decline of 6% in relation to the exports of the 21/22 campaign, the lower production of scenarios A or B that they manage could lead this figure to falls of 21% or 33 %, affecting the availability of foreign currency by US$9,226 million and US$14,115 million, respectively.
Despite the bleak outlook that is expected, there are still some variables that could mitigate the fall, such as the increase in prices due to lower supply.
But beyond all the possible scenarios, variables and expectations, everyone hopes the same thing: that it rains again.
Crops are not the only ones affected. Both in the meat chain and in the dairy there are serious difficulties in obtaining food for the cattle due to lower grass production and the grains are scarce, which leads to an increase in costs.
Obviously this drought is a direct consequence of climate change. Since it is one of our goals to mitigate this consequences, we see opportunities for any Dutch company active in this topics. For more information or statistics, do not hesitate to contact us BUE-LNV@minbuza.nl.