Drought in Argentina Photo La Nacion
The soybean market on the Chicago Stock Exchange fell again this Wednesday (18th), posting losses of more than 20 points in major contracts and partly reflecting forecasts that are beginning to show conditions best of rain, according to analysts and market advisers enough for the next few days in Argentina. However, as prices fall, specialists in the country are repeating their calculations to understand what at least until this first moment will be the impact of not only production losses, but also the financial impact of one of the worst droughts in history.
Anyone who thinks that the damage caused by the drought and the intense heat means that Argentine producers have some relief in terms of the financial volume that they leave to the federal government for their production is wrong. State involvement at the fringes of the field has increased in recent months, according to FADA (Agricultural Foundation for the Development of Argentina). Thus, for every 100 pesos earned on rural land, 67.2% goes to the government.
“One would expect that if production falls, whether due to drought or other adversity, tax pressures would also fall. However, because of the tax structure that weighs on agricultural production, an adverse event like a drought is more likely to decrease than the tax burden increases,” said David Miazzo, the company’s chief economist. “As the drought worsens, income taxes will increase.”
Information: FEE
Class associations and institutions have been organizing for some time and asking for government agencies to review the situation, but still without success. Coninagro’s (Intercooperative Confederation of Agriculture) claim is that the withholdings are not being paid given the losses caused by the drought.
“The situation is serious. Some time ago, when we requested a meeting with the Minister (for the Economy, Sergio Massa), we had a number of demands, but now we have confirmation of the damage: the wheat campaign is over and the losses are between 40%, according to different estimates and 50%,” said Elbio Laucirica, President of Coninagro, who already estimates a loss of at least a quarter of national soybean production.
The institution’s president went on to address the importance that tax breaks would have at this point. “It’s important to have tax breaks: paying withholding taxes when we’re going to have 50% of production is absurd, as is increasing profits that we won’t have,” Laucirica said. “We need a range of tax and credit measures to address the responsibilities that growers will have with the financial obligations of this crop and those that they will have to shoulder for the next.”
Laurcirica added that he continues to call for help for the many ranchers who have killed several animals from the drought in recent months and who need to rebuild their herds.
COSTS OF DROUGHT
The Rosario Stock Exchange (BCR) estimates that the financial losses caused by the drought are already around US$10.425 billion when the problems of soybeans, corn and wheat are taken into account. In terms of volume, the bourse forecasts that the harvest will be 23% lower than originally expected, which will be more than 28.5 million tons less shipped from Argentina due to the unfavorable weather.
Dry rain gauge in the field Photo: La Nacion
With lower production, exports of agricultural products will also be lower and, according to the exchange for the Argentine government, should result in an 18% lower dollar inflow for the agricultural sector in relation to the size of the 2021/22 crop.
Figures provided by BCR also indicate that in soybeans alone, the grower producing on his own land loses about US$282 net per hectare in first soybeans and US$110 in second soybeans. For corn, the early corn caused a loss of US$323/ha, while the later sown corn recorded a loss of US$33/ha. In the case of wheat, a loss of up to US$ 489 per hectare harvested was recorded.
EXTENSION OF PROBLEMS
A report by the National Directorate of Agricultural Risks and Emergencies reported that Argentina’s drought, or risk of drought, has already reached 175 million hectares in December alone. Last month, still according to the Bulletin, the picture was deteriorating, mainly in the north of the country, and nationwide the increase in such conditions was 10 million hectares.
The central region of the South American state recorded the driest year in the last 62 years, the core zone the heart of Argentine production is the second driest place on Argentine territory. And dealing with the 20202022 triennium is the driest for all of Argentina.
WHAT DOES THE FORECAST SHOW?
Updated climate models show agricultural areas could experience some rain this weekend and midnext. Despite this, warnings of ongoing production losses continue to exist as soil moisture levels both at the most superficial and deeper levels remain low and would require more frequent and extensive rainfall to recover effectively.
Map: INTA
Meteorologist Eduardo Sierra told the Argentine newspaper La Nacion that “this Saturday it would start raining well, then the dry weather would return and then the rain would return. , which by the way is normal for this to happen.” .
Therefore, expectations for Saturday’s rains are high. However, experts say that consistent relief and some recovery in crops where still possible can only be seen with more volumes. To reverse the situation, it would have to rain between 100 and 150 mm in central Argentina, which does not appear in the short or mediumterm forecasts.
Argentine meteorologist Leo Benedictis compared five meteorological models to the Jan. 1824 rain forecast, with “the Australian model being the most optimistic and the American the most pessimistic. Similarity,” he says.
Cards: Leo de Benedictis