Drought is on going in Bolivia, Brazil, Peru, Paraguay

Summary

Since September 2023, Orange-level high-intensity drought has been ongoing in four South American countries (Bolivia, Brazil, Peru, Paraguay). Extensive areas including the continent's key agricultural regions are affected, posing significant risks to global agricultural supply chains.

Supply-chain impact

• Grain production disruption: Brazil and Paraguay are the world's largest soybean and corn exporters, and crop failures due to drought could trigger global grain price increases and supply instability
• Mining impact: Water shortages needed for major mineral extraction including Bolivia's lithium and Peru's copper raise concerns about production disruptions
• Inland logistics network paralysis: Declining water levels in major inland waterways such as the Paraguay River and Madeira River constrain bulk cargo transport capacity
• Livestock industry hit: All four countries are major beef exporters, and pasture degradation and feed crop shortages are expected to have ripple effects throughout the meat supply chain

Watch points

• Precipitation recovery timing: Need to monitor Southern Hemisphere wet season (December-March) rainfall patterns and La Niña/El Niño phenomenon trends
• Crop condition reports: Monitor monthly production outlook releases from Brazil's Ministry of Agriculture, Argentina Grain Exchange, and others
• Waterway navigation restrictions: Track water level data and vessel traffic restriction measures in the Paraná River and Amazon River basins