Drought is on going in Argentina, Uruguay

Supply-chain Risk Briefing: Argentina-Uruguay Drought

1. Summary

The ongoing drought in Argentina and Uruguay is classified as Orange level (High) and continues to persist. The simultaneous drought in major South American agricultural producing countries is expected to place significant pressure on global grain and livestock supply chains.

2. Supply-chain impact

• Grain market shock: Argentina is the world's 3rd largest soybean exporter and major corn and wheat producer, raising concerns of sharp global grain price increases if drought continues
• Livestock industry cascade impact: Feed grain shortages and pasture degradation expected to reduce beef production (Argentina is 4th largest global exporter) and dairy product output
• Edible oil raw material supply disruption: Decreased production of oilseed crops like soybeans and sunflowers increases instability in edible oil and biodiesel raw material supply chains
• Regional logistics network impact: Risk of Paraná River water level decline potentially reducing inland agricultural transport efficiency and disrupting Buenos Aires port operations

3. Watch points

• Rainfall patterns: Need to observe South American summer rainfall trends and La Niña/El Niño climate change indicators over the next 2-3 months
• International grain futures prices: Required monitoring of Chicago Board of Trade (CBOT) soybean, corn, and wheat futures price volatility and South American crop outlook reports
• Alternative supply source activation: Need to track trends in Brazil's inland regions and North American grain export capacity expansion