Drought in the center-south and heavy rains in the center west bread basket states of Brazil have taken a massive toll on the country’s all-important farm sector. According to agribusiness analysts, the country will lose at least R$10 billion (around $4.35 billion) in farm revenues this year because of the odd weather patterns.
The smaller than expected crops, while not an entire disaster, has an impact on the country’s inflation. Brazil’s inflation rate is around 5.6% currently and any increase would force the Central Bank to rethink monetary policy.
Major cash crops such as coffee, soy, citrus, sugarcane and even beef cattle ranching have been impacted by the excessive weather. Brazil is the world’s largest producer of all of the above except for soybeans, in which Brazil is second to the U.S.
Soy is currently being harvested in Brazil, so most of the record-breaking crop will remain in tact, according to most recent government estimates. In the state of Mato Grosso, heavy rain is impeding the harvest and soaking the soybeans in the fields. In the last 10 days, some regions of the state have been inundated with 225.9 millimeters of rain, double the historical average, according to the Mato Gross Institute for Agribusiness, or Imea. The state was supposed to harvest around a record 26.9 million tons. But rainfall is expected to reduce that by around half a million, Imea projects.
Some parts of the country will not fair as well. Parana state, a large soy and corn producer, is said to have lost as much as two million tons out of the 16.5 million it is expected to harvest. Agribusiness firms are estimating losses upwards of R$2.2 billion ($956 million). The Rural Economy Department of Parana said some parts of the state lost at least 50% of its soy and corn crops to drought, with ground temperatures over 100 degrees Fahrenheit.
January saw the beginning of the worst drought in decades to hit the coffee belt, destroying crop yields and causing the price of coffee to shoot up more than 40%. For now, Brazil is set to produce 36.3 million bags of arabica coffee beans this season, its lowest production number in three years, according to Conab, the government organization responsible for official coffee and grain crop data. The coffee crop estimate was most recently released in January and could be reduced as a result of the prolonged dry spell.
The most recent Conab soy crop estimate was in February. Brazil is seen harvesting 90.01 million tons of soybeans, down from January estimates of 90.3 million. The corn crop has shrunk slightly to 75.4 million in February’s estimate from the 78.9 million tons forecast back in January.
Source: Forbes Business