Commodities Shuttle: Weather causes Brazil to lose 41 million tons of grain in two years

Climate change caused a production reduction of 41 million tons of grains in the last two Brazilian harvests, in relation to the country’s productive potential.

Drought, frost and excessive rainfall were responsible for a drop of 18.1 million tons in 2021. This year, adverse weather conditions are repeated, and estimates, for now, already indicate a drop of 22.9 million tons.

The southern region has been the most affected. After a production loss of 18% last year, in relation to the initial potential, the grain harvest in this region is expected to be 25% lower this year, compared to what was initially forecast.

With this, the national grain harvest, forecast for a record volume, and close to 291 million tons, will be only 268.2 million tons.

The severe drought that hit the South region affected exactly the three flagships of national production: rice, corn and soybeans. Together they account for 93% of Brazil’s grain production.

According to data collected by Conab (National Supply Company) between January 23 and 29, the grain harvest in the South, estimated at 90.2 million tons in December, should be only 68.1 million this year.

Paraná’s production drops to 33.5 million tons, 22% less than expected in December. In Rio Grande do Sul, the drop is even greater, reaching 28%, and the state will have a production of only 39.9 million tons of grains.

“The numbers are impressive, and we lost the harvest due to climatological issues”, says Sergio De Zen, director of Conab. In his assessment, these numbers are not yet definitive, and crop loss is not just a problem for Brazil, but for everyone who depends on the country’s grain production.

While last year’s losses were concentrated in corn, this year’s losses were in soybeans. Initially forecast at 141 million tons by the official body, the oilseed crop is expected to drop to 125 million.

This reduction has effects on the entire economy, according to De Zen. Soy is essential both in the supply of cooking oil and fuel, in addition to its weight in the composition of animal feed.

In the assessment of the director of Conab, it is a delicate moment, and this crop failure in soybean production in South America impacts not only in Brazil, but in inflation around the world.

Producers may have temporary benefits from volatility, but fluctuating prices make it difficult for industries and market actors to make decisions, says De Zen.

Despite the complicated situation in grain production in the South, the other regions will maintain growth compared to last year, according to Conab data.

The Midwest region, the largest national producer, will have a harvest of 134.5 million tons, with an increase of 15% in relation to last year’s volume. The drop in the South is 13%, considering the same period.

Corn production drops to 112.3 million tons this season, 4% less than initially forecast. Already rice drops to 10.6 million, with a reduction of 8%.

Despite the fall in the total grain harvest this year, the volume is still 5% higher than last year’s.