By Joe Carroll and Michael Hirtzer
A biblical drought plaguing Argentina shows no signs of letting up, and soybean plants continue to be scorched in the Pampas agricultural belt.
Last Thursday, the Buenos Aires Grain Exchange cut its crop forecast by another 14% to 25 million tonnes, the smallest harvest since record-keeping began in 2001.
The figure is also the lowest among leading forecasters.
“Dryness combined with high temperatures continues to cause yield losses across much of the agricultural region,” stock exchange analysts led by Cecilia Conde wrote in a report.
Argentina is enduring its ninth heat wave of the growing season, when the norm is three or four, exacerbating its third consecutive La Niña-fueled drought.
To get an idea of how atrocious this season is being, the Exchange noted that average production in recent years was 80% higher at 45 million tonnes.
With the drought nullifying the agricultural technological advances of the last two decades, yields are also on track to reach an all-time low.
The tiny crop, harvested in the second quarter, has severe implications for Argentina’s ailing economy when the country is already heading into recession and desperately needs dollars to export.
Argentina is the largest exporter of soybean meal for livestock feed and soybean oil for cooking and biofuels.
Analysts at JPMorgan Chase & Co. were already warning that the situation in the Pampas is causing “significant gaps in the global trade matrix.”
Subsequently, soybean meal futures have been one of the few agricultural commodities to post gains this year, as Brazil, the leading oilseed producer, reaps a record harvest.
The Buenos Aires Stock Exchange also cut its corn outlook by another 4% to 36 million tonnes.
With information from Bloomberg