What until a few months ago seemed not to fit into the variables that the monitoring of the protagonists of the City of Buenos Aires now commands. Climate change is no longer a redoubt for outdated ecologists concerned about the future of the planet. As the Minister of Economy himself recognized, the shortage of dollars is a nightmare.
The expectations are now placed on what will happen now with the exports of the agro-industrial complex, the only one capable of ensuring a continuous flow to continue paying for energy and industrial inputs so as not to paralyze the economy. The other two sectors with net export capacity (the mining-perolero industry and the “knowledge economy”) must deal with a lack of investment and a delayed official dollar.
Humidity 0. The first campaign that, although it is not the decisive one for the trade balance, was the most affected: wheat. Unlike other crops, its impact on the “Argentine table” is only compared to that of corn. Of the 23 million tons produced during the last harvest, the forecasts were going down periodically and a decrease of between 8 and 10 million tons in total is now projected. Guilty? The very low humidity.
For example, in the experimental farm of Barrow, near the Tres Arroyos wheat redoubt (Buenos Aires), he released comparative rainfall statistics in the district since 1950 in the key period of April-November. The 2022 values are the lowest in the last 70 years, but far from stabilizing, the volatility of rainfall has been increasing during all this time.
For David Miazzochief economist of FADAwheat has already been inevitably hit by the drought and the projections go down every 15 days, with an estimated decrease of US$3.2 billion in the export balance for this summer.
“This fact will undoubtedly generate a macro impact due to exchange significance, but also on economic activity in a year like 2023, when GDP growth is estimated to be no greater than 1%.”, forecast. For the interior of the country, especially, it means less services, freight and commerce with a strong impact on medium-sized populations.
Estimates are still not clear about what will happen to the coarse harvest (corn and soybeans) but it is already delayed due to low soil moisture. If the drought continues, the soybean and corn harvests, exports and foreign exchange earnings will be affected. But Miazzo projects a second half of 2023 in which electoral uncertainty will probably encourage the producer to reduce the pace of soybean marketing, as was the case in 2015., expecting some type of devaluation since he estimates that the official exchange rate has already lagged 30% against inflation during the last two years. In summary, we could be at the gates of a production with less volume than this and with prices that will no longer be the peaks reached during the start of the war in Ukraine.
Impact. roman dantethe market analysis specialist of FyO, is more pessimistic with the projections, because with the frosts and the subsequent lack of humidity, he does not see them exceeding 12 million tons (40% less than this year). “Of the 9 million tons declared, we believe that 3 million will end up being exported, which are the ones bought at a price and another 6 million more for domestic consumption and there would still be grain left,” he explains. It happens that traditional buyers are not validating marked prices because they would lose about US$40 per ton, but there are no sellers either, scared by the drought. “In fact, many producers who sold want to buy back to cancel their commitments and this is what sustains the markets.”, he clarifies.
For the future, Romano projects two scenarios: a) the market is supplied, the producers want higher prices, but they are not validated; b)) Although there is a remaining volume in the domestic market, given the low production, the Argentine farmer “sits” on the wheat and this forces the mills to pay much higher prices.
The bills. Concern about the final amount of exports is understandable. With stagnant sales, this year the boom in commodity prices that had been rising since the end of the pandemic had an impact, but they accelerated with the war. Even with a climatic year, exports in the first three quarters of this year rose to US$67,131 million, 15% more than the previous year. But imports amounted to US$64.520 million, which meant an astronomical 40% more year-on-year. Perhaps it is what Massa refers to as an “import festival” to give one more turn to the tourniquet applied in foreign trade. It is that the trade balance in these 9 months went from US$12,341 million in 2021 to only US$2,611 million (a fifth) in 2022.
The impact on Argentine economic activity is worrying because the projections of its exports are linked to those of the growth of the world economy: so far in 2022, two thirds of the total exported is explained by the sum of primary products and manufactured products of agricultural origin (PP and MOA). The IMF projects an increase of 1.7% of the GDP for the region against 2.7% for the whole world, much less than the 4.9% of East Asia. “A All this must be added (actually, in addition, as part of the reason that explains the above) the slowdown of the international economy (GDP), which will reduce external demand, will affect -thus- all planetary international trade and will contribute to the relative cooling Of the prices”points Marcelo Elizondo in its latest sector study.
Horizon. “Slow growth, for some time, seems to be what the pandemic and the war declared by Russia will cost the world and, above all, the developed countries,” he summarizes. Juan LlachIn the last report of the IAE. In the opinion of the former Vice Minister of Economy, after the optimism for the control of the pandemic, came the pessimism caused by Russia’s invasion of Ukraine. “We think that inflation will get back on track, albeit very gradually, and most likely we will have a slowdown in the global economy,” he says. The priorities have changed and now, to lower inflation and “consuming more “green” energy would be the (moderate?) price of the threatening global crisis”, he concludes.
This time, the efforts to shield itself from a less friendly world will collide with the urgent need to break the ceiling that has suffocated the Argentine economy for at least a decade: the drought of dollars.
