Argentina soy crop forecast slashed to smallest on record

A drought of biblical proportions in Argentina is showing no signs of letup, with soybean plants getting baked to a crisp on the Pampas farm belt.

The Buenos Aires Grain Exchange has slashed its forecast for the crop by another 14 percent to 25 million metric tons, which would be the smallest harvest since it began keeping records in 2001. The figure is also the lowest yet among other top prognosticators.

“The dryness combined with high temperatures continues to cause yield losses across a large part of the farm region,” exchange analysts, led by Cecilia Conde, wrote in a report.

Argentina is enduring its ninth heat wave of the growing season, when the norm is for three or four, compounding its third straight La Niña-fuelled drought.

For a measure of just how atrocious this season is, the exchange highlighted that average production in recent years was 80 percent higher at 45 million tons. With the drought nullifying agricultural technology gains over the past two decades, yields are also on track for a record low.

The tiny crop, collected in the second quarter, has grave implications for Argentina’s struggling economy at a time when the country already is on the road to recession and in desperate need of export dollars.

Argentina is the biggest exporter of soy meal for livestock feed and soy oil for cooking and biofuels, and analysts at JPMorgan Chase & Co already were warning that the situation on the Pampas is causing “major gaps in the global trade matrix.”

Soy meal futures have subsequently been one of the few farm commodities to post gains this year, even as Brazil, the top producer of the oilseed, harvests a record crop.

The Buenos Aires bourse also axed its corn outlook by another four percent to 36 million tons.