Severe drought blamed for sharp decline in economy, exports of soy and corn, Argentina

The economy in Argentina declined sharply in the second quarter of 2018 as the country suffers its worst drought in decades and a steep decline in exports of soy and corn. Argentina was once the world's top exporter of soy and corn.

According to the national statistics agency, the gross domestic product of the country fell 4.2% between April and June, as compared to 2017. It was the worst performance since 2014, the agency said.

"The economy will contract further in upcoming months amid tightening monetary and fiscal conditions, though the expected rebound in agricultural output will prevent a deeper contraction," the ratings agency Moody's said in a statement, as reported by MercoPress.

Image courtesy NASA Earth Observatory

The drought, affecting the country since November 2017, helped drive a steep decline in its exports of soy and corn.

Such consequences on the agricultural sector of the country were expected earlier this year, when the U.S. Foreign Agricultural Service projected Argentina’s soy production to decline 31% and corn by 20% in 2017–2018 compared to the prior growing season.

The economic consequences of the drought have been significant. Between December 2017 and May 2018, corn prices in the U.S. have risen 14%, and soybean prices 8%.

Losses in Argentina are expected to surpass $3.4 billion, making the drought the most expensive natural disaster in 2018 at the time.

In April 2018, grain market analyst Ignacio Iriarte said Argentina’s 53.5 million-head herd would shrink by between 500 000 and 1 million head.

Image courtesy NASA Earth Observatory

Featured image credit: U.S. Department of Agriculture