The fierce drought punishing Argentina’s farm sector since last year is seen shriveling an already ailing economy this year by three percentage points, a local grains exchange said on Friday, compounding sky-high prices and a weakening peso currency.

Rosario Grains Exchange (BCR) estimates that extremely dry conditions will clip the country’s gross domestic product (GDP) in 2023 by $19 billion, compared to last year, as crop forecasts for the nation’s main grains harvests have been repeatedly cut back in recent weeks.

“The drought has already claimed three points of the estimated Argentine GDP,” the BCR said in a report.

Argentina is one of the world’s top grains producer and exporter, especially for key staples including soybeans, corn and wheat.

Export tax revenue is a major contributor to the South American country’s economy, which suffers from low foreign exchange reserves, massive debt as well as an annual inflation topping 100%.

The government expects the economy to expand only 2% in 2023.

BCR also sees the drought severely affecting state coffers, with taxes on grains export seen falling by more than $2.3 billion in the 2022/2023 harvesting season.

Farmers have suffered several crop forecast cuts since last year.

On Wednesday, the Rosario exchange slashed its forecast for its soybean harvest to 27 million tonnes, down from the 47 million tonnes seen at the beginning of the cycle in August.

It also cut its corn forecast to 35 million tonnes, down from 55 million tonnes seen in August.

In volume terms, parched farm land has led to losses of over 50 million tonnes, Julio Calzada, head of economic research the Rosario exchange told Reuters on Thursday, who described the weather conditions as “unprecedented.”

REUTERS