The South American country is already struggling with rising inflation and facing a decline in grain, its main export.
A historic drought ravaging Argentina’s crops has deepened the grain-exporting giant’s economic crisis, heightened fears of default and jeopardized targets agreed with the International Monetary Fund (IMF).
The South American country, the world’s largest exporter of processed soybeans and the third largest source of corn, is gripped by its worst drought in more than 60 years, which has led to repeated sharp cuts in crop forecasts.
Those forecasts were lowered again on Thursday by the Buenos Aires Grain Exchange after the Rosario Exchange lowered its soybean production outlook to 27 million tons, the lowest level since the turn of the century, when much less of the crop was planted.
“We are facing an unprecedented climate event,” Julio Calzada, head of economic research for the Rosario exchange, told Reuters.
He added that farmers, particularly in the fertile Pampas region, faced losses of $14 billion, and their production is expected to be about 50 million tons less for soybean, corn and wheat crops.
“It is unprecedented that the three harvests fail. We are all waiting for it to rain,” he added.
The drought is a huge blow to Argentina. As October general elections approach, the country is already battling 99 percent inflation and a wall of local and international debt repayments to bondholders and the IMF.
Grain is the country’s main export, and faltering harvests are hampering plans to rebuild Argentina’s depleted foreign exchange reserves.
This in turn has led to talks with the IMF to relax reserve accumulation targets for this year. Analysts have also downgraded the outlook for the country’s gross domestic product (GDP).
“The situation is dramatic,” said Luis Zubizarreta, head of the Chamber of Trade Ports and the Association of the Soybean Industry. “It affects the entire economic situation of the country and foreign exchange earnings at a very critical time for Argentina.”
He added that the flow of grain in the ports was historically low “because there is no merchandise”.
The drought that has affected Argentina’s farmers, exacerbated by high temperatures due to climate change, dates back to May 2022 in some areas. The country has endured at least eight heat waves in the 2022-2023 season.
Grain markets have warned that forecasts for soybean and corn could fall even further if no rain comes. The soy forecast from the Rosario exchange is already the lowest since the 1999-2000 season and the expected yield is the worst since 1996-1997.
“From what we expected at the beginning of the season to today’s situation, I don’t know if we will produce half of it,” said Miguel Calvo, a soybean farmer in the central province of Cordoba.
“I thought all the misery was over and these last eight to ten days were the final blow because of the heat and lack of rain.”