The economic cost of extreme and severe droughts in soybean production in Argentina

Abstract

The objective of this study is to estimate the economic cost of droughts on soybean production in Argentina. By means of a linear model, extreme negative deviations in soybean yields during 1970-2016 are identified. It was found that in all cases extreme deviations in yields are related to severe and extreme droughts according to the palmer index. Constructing a counterfactual scenario and by means of the international soybean price, the economic loss is valued. It was found that in the aggregated sample the income loss due to drought events was of $8.046 million in dollars of 2016, equivalent to 22% of Argentinean international reserves of that year.