A historic drought that plagues Argentina's crops is deepening the economic crisis of the grain-exporting giant, crushing farmers in the Pampas, raising fears of default and jeopardising targets agreed with the International Monetary Fund (FMI). The South American nation, the world's largest exporter of processed soybeans and number 3 in corn, is experiencing its worst drought in more than 60 years, leading to repeated sharp cuts in soybean and corn harvest forecasts.

Those were cut again on Thursday by the Buenos Aires grain exchange after the Rosario stock exchange reduced its soybean production outlook to 27 million tons, the lowest since the turn of the century, when much less of the crop was planted. "We are facing an unprecedented climate event," Julio Calzada, head of economic research at the Rosario Stock Exchange, told Reuters, adding that farmers face losses of $14 billion and 50 million tons less in soybean, corn and wheat production.

The drought is a blow to Argentina. It comes as the country prepares for general elections in October, is battling 99% inflation and faces a wall of local and international debt payments to bondholders and the IMF.

With grains being the country's main export product, plans to rebuild reserves in depleted currencies are stalled, prompting negotiations with the IMF to loosen reserve accumulation targets for the year. Analysts also cut the GDP outlook. "The situation is dramatic," said Luis Zubizarreta, head of the ports trading chamber and soybean industry body. "This impacts the entire economic situation of the country and foreign exchange revenue at a very critical time for Argentina." He added that grain flow in ports is at historically low levels "because there is no merchandise."

The drought affecting Argentine farmers, aggravated by high temperatures linked to climate change, dates back to may 2022. The country suffered at least eight heatwaves in the 2022/23 season.

Grain exchanges have warned that soybean and corn forecasts could fall further if it doesn't rain. The rosary forecast of the Bolsa de Rosário is already at its lowest since the 1999/2000 season and the income forecast is the worst since 1996/97. "From what we expected at (the beginning of the campaign) to today's situation, I don't know if we're going to produce half of that," said Miguel Calvo, a soybean producer in the central province of Córdoba. "I thought all the evils were over and these last 8 to 10 days were the coup de grace due to the heat and the lack of rain."

Source: Agrolink