20180319-法国巴黎银行-Argentina__Farms_feel_the_heat_from_dry_spell_9页_349kb

Summary of Document: Argentina: Farms feel the heat from dry spell

Core Content

This document provides an economic analysis of the impact of a severe dry spell on Argentina's agricultural sector and its broader economic implications for 2017-18 and beyond. It highlights the challenges faced by farmers, the effect on GDP growth, and the potential outcomes for trade and currency markets.

Main Points

Agricultural Output Impact

• Severe Drought: Extremely dry weather conditions are expected to reduce Argentina's 2017-18 agricultural output by 15–20% year-on-year.
• Key Crops Affected: Corn and soybean yields, which account for 75–80% of total agricultural output, are particularly vulnerable.
• Timing of Rainfall: Heavier rains forecasted in the near term may come too late to significantly improve conditions, and could even hinder harvesting.

GDP Forecasts

• Revised GDP Growth: The real GDP growth forecast for 2018 has been revised down to 2.6%, reflecting the drop in agricultural output and the impact of higher inflation on consumption.
• Previous Forecast: The forecast was previously trimmed from 4.0% to 3.0% in the latest Global Outlook.

Trade Deficit Outlook

• Merchandise Exports: Despite the agricultural output decline, soybean export prices are expected to rise, which may help cushion the impact on export value.
• Trade Deficit: The merchandise trade deficit is projected to widen modestly to USD 15.5 billion in 2018, up from USD 14.5 billion.
• Current Account Deficit: Expected to reach 5.6% of GDP in 2018, up from 5.4%.

Currency and FX Implications

• Peso Pressure: The potential for reduced dollar inflows from exports adds pressure on the Argentine peso.
• FX Market Dynamics: The seasonal peak for dollar inflows in Q2 is expected to be one of the few factors offsetting the demand for hard currency and structural twin deficits.

Key Information

• Monitoring Rainfall: The impact of the drought will be re-evaluated in late Q2 as the focus shifts to the 2018-19 agricultural season.
• Sowing Period: The sowing period for the next season is expected to start in Q3.
• Charts: The document includes four charts illustrating agricultural output, real GDP forecasts, soybean prices, and the ARS REER index. These are sourced from Indec, Bolsa de Cereales, Ministry of Agriculture, Macrobond, and BCRA.

Legal and Regulatory Disclosures

• Non-Independent Research: This document is considered non-independent research and is a marketing communication under MiFID II.
• No Investment Advice: It does not constitute investment, financial, legal, or tax advice.
• Confidentiality: The document is intended for professional clients and eligible counterparties only and is strictly confidential.
• Legal Restrictions: It may not be used or relied upon by individuals who are not Relevant Persons as defined by applicable regulations.
• Disclaimer of Liability: BNPP and its affiliates disclaim all liability for any losses arising from the use of this document.
• Performance Data: Performance data may include back-testing and is not indicative of future results.
• Regulatory Compliance: The document is subject to various regulatory requirements across the UK, France, Germany, Belgium, Ireland, Italy, Netherlands, and Portugal, with BNPP being authorized and supervised by relevant financial authorities.

Conclusion

The severe dry spell is expected to significantly reduce Argentina's agricultural output, leading to a revised GDP growth forecast and modestly wider trade deficit. While export prices may rise, the overall impact on the economy is likely to be negative, with currency pressures increasing. The analysis underscores the importance of monitoring hydrological conditions and sowing performance for future outlooks.