It has rained in Brazil’s south and the forecast is for more water coming to the southeast and mid-west, regions that were more severely affected by the recent water crisis. The increased precipitation has turned this into a humid period, unlike last year, when rains were scarce.

The ongoing lack of water affects not just farm fields, but also any other business that depends on energy. Most of the energy in Brazil comes from water. Some 67% of the energy supply in Brazil comes from hydroelectric plants (according to the Brazilian National Agency of Electrical Energy); the indirect effects of the pressure on the electrical system are already leading to lower expectations for economic growth.

Between high fuel prices and problems in fertilizer supply, the Brazilian GDP won’t escape this double whammy to the economy. Estimates for 2022 already show a drop of 1% (from 2.3% to 1.3%) in expected GDP growth, caused by the effects of the lack of energy. On a local level, this has cut purchasing power of families, and at the same time, increased production costs, especially in industry, limiting the entire economic chain.

Inside the fence

Last season, Brazil’s corn crop was impacted by inconsistent weather. The drought devasted nearly half the production expected in some locations. Now, the threat to crop yield is from lack of fertilizers.

Overall, Brazil’s soybean planting, including fertilizer supplies, has been okay so far this year. But supplies available for second crop corn are worrying. Farmers are already thinking about reducing the amount of fertilizer they apply, which will directly affect yield. This is driven by two points: the fear of not getting fertilizer supplies, and the exchange ratio (soybean price vs. fertilizer price), which is at a historic high.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress.