Extensive drought may deepen Argentina’s recession

Argentina’s worst drought in more than 60 years looks set to exacerbate the country’s looming recession, with economic growth now forecast to shrink by as much as 3% in 2023.

According to a report by Bloomberg, previous forecasts had predicted a contraction of 1,5%.

“It’s really bad,” Andres Borenstein, chief economist at EconViews was quoted as saying.

The Rosario Board of Trade cut its soya bean production estimate this month by another 22%, and warned of further cuts, according to Bloomberg.

It said the new figure of 27 million tons would be the smallest harvest in 15 years.

Bloomberg said soya beans and maize plants on the Pampas crop belt were in yield-defining growth stages, a time when they most needed water, but dry conditions persisted, a situation made worse by vicious heatwaves.

“Argentina is suffering a climate scenario that’s without precedent in modern agricultural history,” Cristian Russo, an analyst with the Rosario Board of Trade, was quoted by Bloomberg as saying in a research note.

“There’s no weather event on the horizon that allows us to put floors under yields or under the acreage that simply won’t get harvested.”

Argentina is the world’s biggest supplier of soya meal for livestock feed and soya oil for cooking and biofuels, and the thirdbiggest maize producer.

Bloomberg said the country depended on exports worth tens of billions of dollars in a normal year to shore up hard currency reserved at a time when it was scrambling to meet targets of a US$44 billion (R810 billion) programme with the International Monetary Fund.

The drought had gone on for so long that it had compounded the pressure facing other sectors of the economy.

According to Bloomberg, the government had already granted exporters a delay for maize shipments to help them meet commitments to global buyers and to ensure there was feed for domestic poultry and livestock.

There were also concerns that many farmers would go out of business.

“The problem is in the real economy,” Borenstein said. “A lot of people in the manufacturing or construction sectors will be short of inputs as a result of the drought.”