The graph that shows the harsh impact of the drought on the soybean crop and triggers an alarm for the Central Bank

The United States Department of Agriculture (USDAfor its acronym in English) published an extreme cut in the forecasts of soybean harvest in Argentina which shows how the impact of drought in 2022 and 2023, it threatens the lowest oilseed production in over a decade. It is the key crop for the country’s trade currency income, which is decisive for the possibility of fulfilling the booking purpose agreements concluded with the IMF and also for the ability of the central bank to keep the dollar at bay and provide imports for local industry.

Argentina’s soybean harvest will be nearly 20% lower this season than expected as excessively hot and dry conditions impacted crops during the growing season, the government said on Wednesday. American.

Falling production in Argentina, one of the world’s leading grain suppliers, is an issue that will have repercussions far beyond the country’s borders. The fact that fewer shipments are expected to leave Argentina will boost demand for US soybean exports, which in turn will reduce already low inventories in the North American country. And that will drive up the prices.

Argentina’s soybean crop is now expected to reach 33 million tonsaccording to the USDA’s monthly report entitled World Grain Supply and Demand Estimates.

The number is below February forecast of 41 million tonnes. Analysts had expected the report to put Argentina’s crop at 36.65 million tonnes, based on the average of estimates revealed in a Reuters poll. But the fall in estimates was much more pronounced than expected.

If the USDA forecasts are correct, Argentina’s production this year would already be lower than that which emerged during the 2018 drought and it may turn out to be the worst since 2009. And there aren’t many cuts left for it to even surpass that benchmark.

The US government also cut its forecast for Argentina’s corn harvest to 40 million tons from the previous forecast’s 47 million tons.

Local estimates, like the one made by CREA last week, calculate that in the most extreme scenario, the inflow of commercial currency to Argentina could be reduced by $20,000 million.

Soybean futures on the Chicago Stock Exchange hit intraday highs shortly after the report was released. But closer to the daily life of the city of Buenos Aires, this is bad news for the Central Bank and for the foreign exchange market in general.

And in Argentina, a free dollar which had endured long weeks of calm and even slight setbacks, reversed on Wednesday’s wheel to close with a $7 rise. It’s not the only dollar that has moved: the MEP added $5.89 (1.6%) and closed at $372.86 per share. He counted with liquidation increased by $3.08 (0.9%) to 378.96 pesos.

These days, and in a conversation that seems to be getting longer, the Ministry of Economy and the International Monetary Fund (MFI) continue technical back and forth to determine what the next stage of the economic program will be with readjusted targets, which will require less reserve accumulation throughout the year due to the impact of the drought on the outlook export.

The latest of the negotiations between the government and the IMF began a few weeks ago in Washington with the mission of officials from the Palacio de Hacienda and, after obtaining the political support of the organization’s leadership to move forward with a recalculation of the objectives , the work The technician has accelerated to give final shape to the new scheme of foreign exchange collection target at the Central Bank, which today appears far from the prospects of the executive.

Continue reading: