Soya bean drought creates winners and losers

Droughts have Argentina’s farmers bracing for disappointing harvests. However, the price of affected crops has skyrocketed, benefitting those based elsewhere

Soya bean crops have been hit hard by droughts 

Argentina’s worst drought in decades is having far-ranging economic impacts. Significantly, President Mauricio Macri may have to revise his country’s economic prospects for the rest of the year.

Soya bean crops are expected to be hit especially hard, with the Buenos Aires Grain Exchange reducing its yield forecast by three million tons. While farmers in Argentina fear the worst, those based elsewhere are preparing to reap the rewards of supply shortfalls and higher prices.

US farmers in particular are likely to benefit from increased export demand, while futures traders are keeping a close eye on price rises. Argentina’s adverse growing conditions could also have wider implications for food markets all over the world.

US farmers in particular are likely to benefit from increased export demand

Soya bean meal, a protein supplement primarily used in animal feed, has experienced price rises even more pronounced than those affecting soya bean crops.

In early March, those prices hit a 20-month high (see Fig 1) and raised questions about whether livestock producers would be forced to raise prices to compensate for higher feed costs.

In today’s globalised economy, it is worth remembering that a lack of rainfall in one part of the world can affect the price of products thousands of miles away.