The drought threatens a significant drop in income for Argentina’s agricultural industry. The Foundation for Agriculture Development (FADA) expects exports to be US$13 billion lower for the current year compared to 2022.
The Rosario Stock Exchange also reports that corn harvest projections fell by 15% and soybeans by 7%. Forecasts that are also frightening for the value of exports from the agro-industrial sector, close to 67% of the country’s total exports.
The drought, therefore, worries both the agri-food industry and the national economy, as it is expected to cut Argentinian GDP by 3 percentage points. Moreover, a drop in dollar income leads to increased currency stress, which can widen the gap between official and parallel exchange rates and create expectations of a devaluation.
Damage to corn and soybeans
The latest report published by the Rosario Stock Exchange shows that corn projections for the last 12 months have decreased from 50 million tons to 42.5 million tons due to poor weather conditions, which will result in the worst harvest in the last five years. Despite recent rains in January and February, the situation is not expected to improve as the soil had very low water reserves due to almost two years of below-average rainfall.
In addition, the BCR has reduced its soybean projection to 34.5 million tons, marking a year-on-year drop of 18% and 7% lower than the 37 million-ton estimate it made a month ago. The organization evaluates that the drought caused a loss of 1 million hectares, with Buenos Aires being the province most severely affected.
The government intervention
The government is ready to activate a fund worth AR$5 billion to help Argentine farmers hit by considerable losses during the unprecedented drought. Economy Minister Sergio Massa has announced that around 54,100 producers will be protected by this measure and other similar ones, such as the suspension of advance income tax payments, but also the lower interest rates and higher subsidies.
Sources within the Agriculture Secretariat have indicated that further measures can be expected.
Source: buenosairesherald.com
