By Lucila Sigal and Eliana Raszewski
BUENOS AIRES (Reuters) – A historic drought ravaging Argentina’s crops is deepening the grain exporting giant’s economic crisis, crushing farmers across the Pampas, heightening default fears and putting at risk targets agreed with the International Monetary Fund (IMF).
The South American nation, the world’s top exporter of processed soy and No. 3 for corn, is in the grip of it worst drought in over 60 years, which has led to repeated sharp cuts to soybean and corn harvest forecasts.
Those were cut again on Thursday by the Buenos Aires grains exchange after the Rosario exchange slashed its soy production outlook to 27 million tonnes, the lowest since the turn of the century, when far less of the crop was planted.
“We are facing an unprecedented climatic event,” Julio Calzada, head of economic research the Rosario exchange, told Reuters, adding farmers were facing losses of $14 billion and 50 million tonnes less of grain output across soy, corn and wheat.
“It’s unprecedented that the three crops fail. We are all waiting for it to rain,” he added.
The drought is a huge blow for Argentina. It comes as the country heads for crunch general elections in October, is battling 99% inflation and faces a wall of local and international debt repayments to bondholders and the IMF.
With grains being the country’s main export, plans to rebuild depleted foreign currency reserves are stalling, prompting talks with the IMF to ease reserve accumulation targets for the year. Analysts have also cut the GDP outlook.
“The situation is dramatic,” said Luis Zubizarreta, head of the commercial ports chamber and soybean industry body. “It impacts the country’s entire economic situation and the income of foreign currency at a very critical moment for Argentina.”
He added the flow of grains at ports was at historically low levels “because there is no merchandise”.
The drought affecting Argentine farmers, which has been exacerbated by high temperatures linked to climate change, goes back in some areas to May 2022. The country has suffered at least eight heat waves in the 2022/23 season.
The grains exchanges have warned that soy and corn forecasts could fall even further if no rains come. The Rosario exchange’s soy forecast is already at the lowest since the 1999/2000 season and the expected yield the worst since 1996/97.
“From what we expected at the (start of the campaign) to today’s situation, I don’t know if we will produce half of it,” said Miguel Calvo, a soybean farmer in central Cordoba province.
“I thought all evils were over and these last 8-10 days have been the coup de grace due to the heat and lack of rain.”
(Reporting by Lucila Sigal and Eliana Raszewski; Additional reporting by Maximilian Heath; Writing by Valentine Hilaire; Editing by Adam Jourdan and Sandra Maler)
