Argentina’s worst drought in 60 years has ended. The rains that have fallen over the past decade in the center of the South American country are bringing relief for the next planting season, although they came too late to reverse the advanced crop decline this season, with losses estimated at up to $15,000 million according to the Rosario Stock Exchange (BCR). The expected decline in earnings from the agricultural export sector, the main source of foreign exchange earnings, will pose difficulties for President Alberto Fernández in his last year in office and reduce his chances of re-election.
“The last day of summer was the first day of a new script for the Argentine climate,” stressed the BCR in its weekly report. The main grain market in Argentina said that “the high pressure center that had limited the development of storms from the central east of the country was finally moving” and the storms left “very good coverage and significant accumulations in the center of the pampa region”. .
On average, around 50 millimeters of precipitation were recorded in the core region, as Argentina’s most productive area is called. However, the distribution was uneven: in the center and southeast of Santa Fe, one of the provinces hardest hit by water shortages, rainfall exceeded 100 millimeters, as did neighboring Entre Ríos. Buenos Aires province, the country’s largest, was left out. In some areas, only isolated rainfall was recorded, barely exceeding 10 millimeters.
However, the improvement in future forecasts does not change the bleak prospects for this season. The corn and soybean plantations have been badly hit by the water shortage and the late rains will not be enough to recover them. “It was a cumulative drought for three consecutive years,” Cristian Russo, an agronomist and head of the Rosario Stock Exchange’s agricultural estimates department, pointed out a few days ago. According to a survey conducted before the rains, “Soybean forecasts have been cut from the 49 million tons expected to be produced to 27, a 45% loss. The other major crop, corn, rose from 54 million to 35 million,” he adds.
Rosario’s rancher and siblings Joan, Nadia and Third Hofer pose in their drought-ravaged cornfield.Sebastián López Brach (Getty Images)
Around 2,000 trucks daily entered Argentina’s grain export ports, centered on Rosario and the surrounding area, for the first three weeks of March. The figure represents a decrease of more than 50% compared to truck traffic over the same period in 2022, according to data from consultant Javier Preciado Patiño quoted by the Infobae portal. As of March 23, 125 grain ships have been loaded, up from 216 in 2022. The volume of soybeans traded to date is the lowest in the last two decades. For corn, sales to processors and exporters are the lowest since 2016.
The harvest will end in late May and that will be when more accurate numbers are available, but estimates by various organizations speak of losses in the neighborhood of $15,000 million. If confirmed, it would top off the poor numbers from 2009, when that year’s drought meant losses of $14.3 billion.
More deficit and inflation
This is a hard blow to the whole agro-industrial chain and also to the government. The fall in government revenue from export taxes makes it even more difficult to meet the plan agreed with the International Monetary Fund to reduce the deficit in exchange for $44 billion in debt restructuring. The agreement also included accumulating $5,000 million in reserves per year, an unattainable goal this year.
Joan Hofer walks among dry soybean plants in San Jerónimo Sud, Santa Fe province.Sebastián López Brach (Getty Images)
The drought, in addition to the record number of heat waves recorded this summer, has also impacted the fight that Fernández’s executive is waging against one of the weakest points of Argentina’s economy, inflation. Thousands of cows died of thirst in Argentina’s fields and the lack of grass made livestock farming more expensive. The difficult situation led to significant price increases for both meat and dairy products. In February, the value of groceries increased by almost 10% compared to the previous month and exceeded 100% annually.
If the normalization of precipitation is confirmed, then its positive impact on the next agricultural campaign next year will be felt. It will give a boost to the government that Argentines will elect in October’s elections.
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