Forecast: agricultural exports down US$13 billion from 2022 due to drought

Corn and soy harvests are expected to plummet by 15% and 7% respectively.

This year the agricultural industry will export US$13 billion less than in 2022, mainly due to the ongoing drought, Foundation for Agriculture Development (FADA) has found. Moreover, the Rosario Stock Exchange reported that corn crop projections fell by 15% while soybean harvests were down by 7%.

According to the FADA report published yesterday, the ag sector will export US$47 billion in 2023, some 21% less than last year. The plummeting exports will encompass grains, but also other products like meats and milk.

“Fewer exports mean less dollar income and less collection of export duties,” said Nicolle Pisani Claro, economist and researcher at FADA. Pisani Claro stressed that 97% of export duties comes from agro-industry, US$10.5 billion of a total of US$10.9 billion. Some 91% of that came from cereals and oilseeds. Moreover, agro-industrial exports represent 67% of Argentina’s total exports.

“A drought of this magnitude is not only bad news for the producers, but also for Argentina as a whole,” the FADA report reads. Less dollar income, according to the foundation, means greater currency stress, which will widen the gap between official and parallel exchange rates and generate greater expectations of a devaluation.

“Due to the tax structure applied to agricultural production, an adverse event like a drought, instead of reducing the tax burden, makes it bigger. This is because the export duty is calculated by gross price and does not recognize declines in productivity”, said David Miazzo, chief economist at FADA.

Moreover, they added that the drought could potentially slice 3 percentage points off the GDP. According to the report, the international demand for Argentine exports and prices will also decrease this year.

Less corn and soy

According to another report Rosario Stock Exchange (BCR) published yesterday, the drought will mean a plummet in soybean and corn production.

Moreover, corn projections for February dropped from 50 million tons for the last 12 months -made with normal weather- to 42.5 million tons, the worst harvest in the last five years, according to the report. Rains in January and February will not be sufficient to alleviate the situation: soils had virtually no water reserves after “23 months” of under-average rainfall.

The BCR report also states that, at 64.1 quintals per hectare, the performance of corn was the worst in 15 years. That happened “despite the huge technological leap and the ever-growing fertilizer doses,” the report added.

Moreover, the BCR slashed its soybean projection to 34.5 million tons, a year-on-year decline of 18% and 7% down from the 37 million-ton annual crop it was predicting a month ago. The BCR calculates that 1 million hectares were lost due to the drought, with Buenos Aires being the hardest-hit province.

In another report published last week, the BCR also calculated that the drought could have a total negative impact of US$14.19 billion, 2.2% of the country’s GDP.

The government’s measures

The government will launch a AR$5 billion relief fund for farmers who took considerable losses amid a historic drought, Economy Minister Sergio Massa announced last Tuesday.

After a meeting between Massa and the Liaison Board, the Minister said that the assistance system will work “through a revolving fund”, and will be articulated through provincial and municipal governments.

“We are speaking about a universe of 54,100 producers that will be covered by these measures,” Massa said. Although recent rains “brought some relief,” the drought has already caused significant damage, Massa said.

Massa also announced other measures, such as the suspension of advance income tax payments for producers in areas hardest hit by the drought, smaller interest rates, and bigger subsidies. Another decision, that will benefit some 4,200 beef producers, is the exemption of the income tax for those who undersold their cattle due to a lack of food caused by the drought.

According to sources in the Agriculture Secretariat, more measures are expected.


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