UPDATE 2-Argentina soy harvest could be worst in decades as forecast slashed

(Recasts with focus on soy harvest)

BUENOS AIRES, March 8 (Reuters) - Argentina’s Rosario grains exchange sharply cut its forecast for the country’s 2022/23 soybean harvest on Wednesday, dropping it to the lowest estimated this century and warning of future cuts as the country’s key agricultural region battles an ongoing drought.

The new estimates put the current cycle’s soy crop at 27 million tonnes, below the 34.5 million tonnes seen in last month’s forecast and under the 27.5 million tonnes harvested in the 2000/2001 season, when a separate exchange, the Buenos Aires grains exchange, began keeping records.

Data from the agriculture ministry showed soy production of 20 million tonnes in 1999, though only over an area just over half the size of the one expected in this season.

The Rosario exchange also cut this cycle’s corn crop forecast to 35 million tonnes, under last month’s forecast of 42.5 million tonnes.

Argentina is the world’s top exporter of soy oil and flour and the number 3 exporter of corn, but the current agricultural season has been hit hard by the worst drought in six decades, affecting some areas since May 2022.

“Argentina is suffering from a climate scenario without precedent in modern agriculture,” the exchange said, with the country facing the driest season in 60 years and the highest temperatures since the early 1900s.

Early frosts have further worsened the situation for farmers.

The Rosario exchange hinted in its report that forecasts could continue to slide.

“There are no weather conditions on the horizon which allow us to offer an estimated minimum for the harvest,” it said.

The ongoing drought is expected to cause further contraction in Argentina’s economy, analysts at Itau said Wednesday, revising their gross domestic product forecast for 2023 down to -3% from -1.5%.

The “drought will continue to limit activity and high inflation is likely to persist,” the analysts wrote, as

monthly inflation sped up

to 6% month-over-month in January. (Reporting by Maximilian Heath; Additional reporting by Gabriel Araujo; Writing by Brendan O’Boyle and Kylie Madry; Editing by Isabel Woodford and Chris Reese)