Multi-year drought dashes Argentina’s food-export hopes

A third year of drought in Argentina has drastically reduced wheat production, threatening the country’s ability to supply anemic global food markets and pressuring the fragile economy, the FT’s David Feliba reports. Earlier this year, President Alberto Fernández touted the country’s agribusiness exports as a potential solution for the world’s food shortage. 

In the 2021/22 season, Argentina exported 16.25 million tons of wheat, but persistent drought conditions have led the US Department of Agriculture to cut estimates to 15.5 million tons this year, while local exchanges forecast as little as 11.8 million.

The super-ministry that oversees the economy and agriculture announced a subsidy for small producers as the drought, according to agroconsultancy Nóvitas, threatens cash crops such as corn and soy. However, the government lacks the budgetary space for more support and has retained high export levies and complicated exchange rates, which undermine exporters.

 The combination of lower crop yields and depressed exports will result in a wheat harvest worth $5.5 billion, down 36% from $8.6 billion in the previous season, according to projections by Quantum, an economic consultancy. Such a shortfall poses a substantial risk for an Argentina economy heavily dependent on agricultural exports. 

The current situation is reminiscent of the 2017/18 season when drought caused lower-than-expected crop yields and implied macroeconomic effects triggered outflows that resulted in the 2018 default.

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