Brazil is currently experiencing the worst drought weather since records began in 1950, according to the latest data from Brazil's National Center for Natural Disaster Monitoring and Early Warning, more than 5 million square kilometers of land in Brazil, or about 59% of the country's land area, is affected by drought, with more than one-third of the country facing an ″extreme drought″. The drought, which has lasted 12 months and is not expected to abate in the near future, has already caused damage to Brazilian citrus, coffee, sugar cane and other crops, and may also affect the sowing of the new Brazilian soybean crop.
Impact of drought on crops in Brazil
Impacts on Soybeans: The current severe drought conditions have resulted in insufficient soil moisture to meet the moisture requirements for planting and growing soybeans. This drought, if it persists, will likely have several impacts. First, the most immediate impact would be to cause a delay in planting. Brazilian farmers usually begin planting soybeans after the first rains, but due to the lack of necessary rains, Brazilian farmers cannot begin planting soybeans as planned, which could lead to a delay in the entire planting cycle. The delay in Brazilian soybean planting will have a direct impact on the timing of the harvest, which could extend the marketing season for U.S. soybeans in the northern hemisphere. Second, lack of moisture can inhibit soybean growth, and protein synthesis in soybeans is impeded under drought conditions, further affecting soybean yield and quality. To mitigate the effects of drought on soybeans, farmers may take measures such as irrigation, which will increase planting costs. Finally, considering that Brazil is the world's largest exporter of soybeans, changes in its production have an important impact on the supply of the global soybean market, and supply uncertainty can trigger volatility in the international soybean market.
Impact on sugarcane: As the world's largest sugar producer and exporter, Brazil's sugarcane production has a significant impact on the supply and demand pattern of the global sugar market. Recently, Brazil has been suffering from a severe drought, which has led to frequent fires in sugarcane growing regions. According to Orplana, a sugarcane industry organization, there were as many as 2,000 fires during one weekend. Meanwhile Raizen SA, Brazil's largest sugar conglomerate, estimates that about 1.8 million tons of sugarcane, including sugarcane purchased from suppliers, have been damaged by fires, a figure that represents about 2% of expected 2024/25 sugarcane production. Given the uncertainty surrounding Brazilian sugarcane production, the global sugar market could be further impacted. According to the Brazilian Sugarcane Industry Association (Unica), in the second half of August 2024, the sugarcane crushed in Brazil's south-central region amounted to 45.067 million tons, down 3.25% from the same period last year, while sugar production amounted to 3.258 million tons, down 6.02% from the same period last year. The drought has already had a substantial negative impact on the Brazilian sugarcane industry, not only affecting Brazil's domestic sugar production, but also potentially exerting upward pressure on global sugar prices, which in turn will affect the supply/demand balance of the global sugar market.
Impact on Coffee: Brazil is the world's largest coffee producer and exporter, and its coffee industry has a significant influence on the global market. According to the Instituto Brasileiro de Geografia e Estatística (IBGE), Brazil's coffee production in 2024 is expected to be 59.7 million sacks (60 kilograms per sack), a 1.6% downward revision of the production estimate compared to the previous forecast data. This downward revision of the production estimate is mainly due to the adverse effects of dry weather conditions on the growth of coffee beans, in particular the reduction in bean size due to drought, which in turn affects overall production.
