(Bloomberg) -- A drought in Argentina is eating into the country’s most important crops.
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Rains that were expected to fall on the Pampas growing belt last week were too spotty to help plants recover. As a result, the Buenos Aires Grain Exchange cut its forecast for the South American nation’s corn and soybean crops by 2%, according to the bourse’s weekly report.
“The lack of rain and high temperatures have affected water levels in the soil and, in turn, the condition of corn plants, curbing their yield potential,” analysts led by Cecilia Conde wrote in the report.
The dryness is worrying both traders and the Argentine government as the epic drought of 2023 is still fresh in their memory. Crop exports are a key source of foreign currency revenue for President Javier Milei, who is been battling inflation and a shortage of US dollars. Milei has promised to lift Argentina’s currency controls — the top deterrent for foreign investors — but he’s made clear he needs more dollars to do it and keep the peso stable.
Argentine farmers are now forecast for produce 49.6 million metric tons of soybeans and 49 million tons of corn, the exchange forecasts. Soy acreage labeled as being in a poor or very poor conditions jumped to 28% from 21% last week and 8% two weeks ago.
The next few weeks will be crucial. More dryness would put Argentina on a path to even smaller harvests, and swaths of the Pampas are already forecast to stay dry over the next week, according to the bourse’s weather maps.
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