The Food Journal and Food, Nutrition & Science

An alliance between The Lempert Report and The Center for Food Integrity

Drought in Argentina Means Higher Soy Prices

Drought in Argentina Means Higher Soy Prices

Climate and Crops

February 22, 2009

When your customers next visit the supermarket, they may be greeted by higher food prices in certain aisles. Drought since late spring (Southern Hemisphere seasons are reversed) has plagued crops across Argentina’s Grain Belt. Corn and soybeans have been severely damaged by hot temperatures and the lack of rain.
 
In the period from November 1st through January 24th, most of the region received just 4 to 7 inches of rain. This is only 30 to 50% of normal rain across the Grain Belt for the November, December, and January period.
 
To compound the drought issues, temperatures have been high as well. During the same period, temperatures were regularly above 100ºF, averaging as much as 6ºF above normal. This dangerous combination of drought and excessive heat wreaked havoc on crop growing cycles. From Córdoba and Santa Fe to Buenos Aires, corn matured while grain-filling was still occurring. Additionally, soybeans were in their key flowering stage when the most severe drought struck.
 
As a result, the USDA continued to slash Argentine production estimates this month. Corn production estimates were reduced 18% from last month, while soybean production estimates were reduced by 12%.
 
The region turned dramatically wetter this month, with a refreshing 4 to 10 inches of rain falling in southeastern Córdoba, southern Santa Fe, and Entre Rios. This rain was especially helpful for the second soybean crop planted in January and early February.

Improvements to the crop from the recent rains are detailed in the The Vegetation Greenness Index for the week of February 8th. During that week, the rain in Argentina helped push soybean prices downward by 4.3% to around $9.58 a bushel. However, although this brief respite from the drought may help correct the situation for later season plantings, the recent arrival of scorching temperatures and lack of rain is expected to put upward pressure on prices yet again.

So what exactly does this mean for the consumer? Soybeans are the primary ingredient for many processed foods – from margarine, salad dressings, and mayonnaise, to crackers, cakes, and cookies. With Argentina being the world’s third largest soybean exporter, higher prices are likely.