Drought, soaring fertiliser costs push farmers to grow more soy

Farmers are grappling with a third straight year of withering drought ahead of the growing season, but this year they have a new strategy to beat it: plant soybeans.

For the first time since 2015, growers on the Pampas crop belt are set to expand the area planted with soybeans as they try to shield their businesses from the dryness. This is an unexpected move because corn has been preferred over soybeans in past seasons to get the most out of droughts. This year, however, corn is the bigger risk. The yellow grain uses far more fertiliser, whose costs soared amid Russia’s invasion of Ukraine. Farmers are loath to throw too much money at a season portending low yields on parched fields, so soybeans, which are cheaper to plant, are making a comeback.

Traders watch Argentina closely because it’s the world’s biggest exporter of soy meal used in raising animals for meat, as well as soy oil for cooking and biofuels. Any increase in supplies from the country would flow to global markets and become a significant factor in food prices, which have been rising and recently touched record highs.

On the most productive slither of the Pampas, known as the zona nucleo, “farmers are changing the way they face the season: They’re going defensive,” said Cristian Russo, who’s in charge of crop estimates at the Rosario Board of Trade. “We’re seeing a lot of them switch to soy because it reduces risk.”

Soy planting could expand to 17 million hectares (42 million acres) from last season’s 16.3 million, said Martín López, an analyst at the Buenos Aires Grain Exchange. To be sure, that’s nowhere near the record highs of 20 million hectares in the mid-2010s. In a preliminary forecast last month, the Rosario bourse said the soy area may grow by four percent, with corn acreage shrinking about three percent. The longer it stays dry, the bigger the shift will be, López said.

Soy planting in Argentina has shrunk for six straight years, according to Buenos Aires Grain Exchange data, as farmers were drawn to corn because of lower export duties and the drier climate: Corn, of which Argentina is also a top-three exporter, has a larger planting window that allows more chance for rainfall.

This is Argentina’s third consecutive drought, causing farmers everywhere to suffer. Maps of farmland water reserves sent on September 19 by the Agriculture Secretariat showed the drought sprawling even wider in the zona nucleo.