Argentina’s soybean crop is estimated to drop ten million tons this year with exports totalling 37 to 39 million, which means the country will receive 3.5 billion US dollars less and the administration of President Cristina Fernandez de Kirchner will see revenues contract by 1.2 billion US dollars.
This is particularly serious with mid term elections only three months away, an unending conflict with farmers precisely over the 35% export levy on oilseeds and the promised (30%) share of those funds with (loyal) provincial governments, less generous than expected.
Besides, this coming turbulence has already reflected in the money market which has seen the Argentine peso loose 7.5% against the US dollar in the first quarter.
In 2008, Argentine soy exports reached 16.5 billion US dollars (23% of all Argentine exports), which in tax revenue terms represented 5 billion US dollars.
Soaring international prices and higher profits per acre turned soybeans in the bonanza crop of the last few years, advancing over other more traditional crops such as corn, wheat, cattle fattening and dairy farming.
In effect, this last summer crop begun with a record area dedicated to soybeans, 17.2 million hectares but this year, because of the worst drought in decades, yields in some areas have dropped to 30/40% of the 2.700 kilos per hectare of the 2007/08 crop.
Meagre results have also been extensive to corn and wheat, with crops down in the range of 50% because of the combination of drought, expansion of soy and the ongoing conflict with the Argentine government over export taxes.
Argentine export surpluses this year for corn have been limited to 6 million tons and wheat to half a million tons.
Overall this means that Argentina’s total grains and oilseeds crop will be scratching 70 million tons, down from the 97 million tons of last year and even further distant from the over 100 million tons forecasted at the sustained current growth of farmland production.
And if the conflict with the Kirchner administration persists, the coming crop year can be expected to see an even smaller volume as penny short and discouraged farmers will not be enthusiastic about planting or breaking the 100 million tons milestone.
The Economics Statistics Office from the Argentine Rural Society estimates that the lost crop will represent a two point drop in Argentina’s GDP.