In fact, It is estimated that the soybean harvest will rebound 140% year-on-year, while corn will climb 60%. In this way, the improvement in agricultural production will have a positive impact on GDP in 2024 of around 2.8 pp, estimated the consulting firm Ecolatina.
In this regard, a recent report from the Rosario Stock Exchange (BCR) highlighted the “optimism” in the sector, by highlighting: “The coarse begins with ‘a marked water recovery’ that allows us to aspire to ‘exceeding yields’.”
For example, the entity assured that the impact of the climate “was devastating”: “60% of the national soybean crop and 36% of the corn crop were lost due to a drought that lasted until almost the end of October. The situation was alarming, and producers faced significant economic losses.”
“However, the panorama today is different. November 2023 has seen a series of storm fronts that have occurred in the Pampas region, which has led to a notable water recovery. According to the latest report from the BCR’s Strategic Guide for Agriculture (GEA), these rains have ‘changed the productive face’ of the country,” he highlighted.
And he stressed that currently the conditions of the soils have improved “significantly“, allowing the producers “harbor a new hope”. Thus, the BCR highlighted, “a production of 50 million tons of soybeans and 56 million tons of corn is projected, and optimism is growing in the sector”. “This marks a turnaround since the previous year, when Argentine agriculture was struggling to survive in the midst of the drought,” the report highlighted.
Although, they clarify, “The outlook is not without challenges.” The report also highlights the uncertainty surrounding the El Niño climate phenomenon. “Although initially expected to be a moderate El Niño, weather conditions have proven to be extremely variable. It is now estimated that there is a greater than 55% chance of at least one strong El Niño persisting during the January/March 2024 quarter. , and the possibility of a very strong El Niño is not ruled out,” the study highlighted and warned that a stronger El Niño can also have a significant impact on agricultural production.
Agricultural rebound: impact on the economy
The consulting firm Ecolatina put concrete numbers on the estimated recovery of the agricultural sector: “After falling close to 35% in 2023 -with a drought that generated more severe effects on the sector than that of 2009-, will be recomposed in 2024: we estimate that the harvest of the three main crops (wheat, corn, soybeans) would recover between 75-80% in the 2023/24 campaign, with soybeans (+140% y/y) leading the rebound, followed by corn (+ 60% ai) and wheat (+20% ai). Thus, we estimate that the improvement in production would have a positive impact on GDP in 2024 of around 2.8 pp.”
Meanwhile, the firm highlighted that “The valued harvest would be around US$13,500 million extra compared to the previous campaign at current prices” and they highlighted that “A key source of tax revenue will be recovered, with a contribution in Export Rights once again around 2% of GDP.” Finally, he explained that “the harvest conditions of fresh foods will improve and, therefore, their availability in the market, taking pressure off an inflation that will inevitably accelerate.”
Hand in hand with greater production, the rise in the official dollar and a consequent smaller exchange gap will also help to greater currency liquidation for next year. In this regard, Ecolatina analyzed: “In terms of volumes, the recovery of the harvest will play in its favor, together with an ordering of the exchange front that would lead to a smaller gap, an improvement in the real exchange rate and fewer restrictions.. This will result in a positive performance of external sales during 2024.”
Source: Ambito
