Situation/weather: We are back to a more normal situation in terms of weather. Last week of March, we registered some rains which allow us to begin again pumping water from the river (restrictions set up by authorities have been lifted) in order to fulfill our artificial lake used as water reserve.

Due to the intense drought period we faced earlier this cycle, we were forced to use all our water reserve to irrigate the rice fields. However, it was still not enough as we report it previously.

Drought situations in Latam (26/10/20)

Harvest: Harvest and drying process have been completed. Among the 965 ha which could be sowed (vs 1528 ha budgeted), we could only harvest first stage of sowing on 538 ha. We could temporarily irrigate our first block of sowing thanks to our artificial lake but not the 2^nd stage which we had to abandon (see previous posts).

We have produced 2,763 tons with a yield of 5.1 t/ha and an average quality index of 42%. We have sold almost all rice stored in our silos, and we could sold it at a peak price of USD 250/t. However, we are far from our objectives this year; it was a very challenging and disappointing campaign for us so as all the rice producers.

Diversification: For diversification purpose, we agreed with our partner to add soybean cultivation to our mix. We are planning to develop with our partner 1,100 ha of soybean at the farm over the next 3 years.

The farm will then have a modular double production: 1,600 ha dedicated to rice cultivation and 1,100 ha dedicated to soybean cultivation. Soybean and rice have not the same momentum of production and soybean production does not require irrigation like rice. Furthermore, this crop has great outlook. China imports the most soy and is expected to significantly increase its import of the commodity. Soy is pervasive in our lives. Not only are soybeans made into food products like tofu, soy sauce, and meat substitutes, but we also eat them in the form of soybean oil and soybean meal. Soybean meal is widely used as animal feed, so we humans consume much of it indirectly via our meat and dairy.

You can see on the farm map our productive area of which 2,840 ha are dedicated to crops production (adjustable) and 270 ha may be allocated in a near future to a cattle breeding activity. We are going to start land preparation of soybean and rice in early April.

Situation/weather: The rains, which were so sorely lacking during the sowing and the development period of our rice, are back as you can see. The river went up to a more normal situation and we are taking advantage to refill smoothly our reservoir which reached it lowest level due to the intense drought the entire region faced earlier this cycle.

Production: The harvest of our 1^st block (538 has) is almost completed, and production is know processed to be dried and stored in our silos. As for our 2^nd block (438 has), our engineers consider that the plants have not developed enough to worth any harvest.

We faced water stress conditions for this block during vegetative, flowering and grain filling stages. Water stress at vegetative stage significantly reduced plant height and total biomass due to decrease of photosynthesis rate and dry matter accumulation. However, water stress at flowering stage had a greater grain yield reduction than water stress at other times.

Only weeds have developed well as you can see. The minor small rains we registered during the 2^nd semester 2020 only help to boost them. Weeds have competed with rice for water, nutrients, space and light.

As a result, we have decided not to harvest the entire block and the land will be cleaning for the next cycle.

Market: Global rice output is tentatively expected at a new peak on bigger outturns in Asian producers, including India and China. Consumption is also forecast to trend higher on population growth, albeit with uptake in India potentially declining due to the conclusion of COVID-19-related food security schemes. Following a contraction in the prior season, world stocks could edge up.

For now, local prices remain at peak level as most of the farmers have not started yet their harvest. Given the drought faced by all producers, the production will contract but producers are going to be forced to sell what could be saved to cover their costs under conditions set up by mills due to the High level of indebtedness of producers and accumulation of bad cycles.

Situation/weather: After having faced a long drought period with strong water shortage, rains are back at the worst possible time as we are starting harvest period. Rainfalls are delaying the harvest process as the soil became muddy and the combine needs to adjust their speed rotation to avoid losses in yield. Meanwhile, humidity of grains is going down quickly and we are currently already in a range of 20 to 23% which is an indication of attaining physiological maturity.

Production: on 11/01/21, we began to harvest our 1^st block (Block G – 538 has).  So far, we have harvested 50 has and got a preliminary yield of 6.5 t/ha with an index quality between 50 and 54 entire grain. We are expecting lower yields for the remaining surface as the plots suffered more for water shortage.

Correct timing at harvest is essential to avoid losses incurred by harvesting too soon or too late. Immature grains harvested too early result in a high percentage of broken and low milling recovery, while if harvesting is delayed; the crop is exposed to insects, rodents and birds, in addition to the risks of lodging and shattering.

However, water stress recorded over the past months affected the grain development in its germination period and in its blooming stage (unfilled grains). The situation is irreversible.

As for our 2^nd block of sowing (427 has), the production has suffered the most from the drought and we are going to evaluate the fact if its worth or not to harvest the entire block. The situation is very complex this year and it’s going to be a bad season for all producers.

Weather: The situation remains unchanged as a large part of South America is in the grip of a serious drought. Over the last month, we registered 77 mm of disparate rains whereas it’s generally raining 246 mm on average. Given the ambient temperatures which exceed 40°c during the day, the rains did not even manage to permanently moisten the soil (immediate vaporization).

The forecast for the next 3 months indicates that water deficits will continue to shrink considerably. Severe deficits are forecast in Brazil from Mato Grosso do Sul through São Paulo State, in Paraguay and in the northern region of Argentina.

Sowing and irrigation: Only 1,000 has have been sowed and we are not going to sow any incremental surface given the situation. Among the surface sowed, 500 has of plants are going to be abandoned given the lack of water available. At the stage, rainfalls registered are only boosting weeds for the 2^nd stage sowing.

We have allocated the raining water available from our artificial lake to the 1^st block sowing (Block G) as the crops was in a more advanced stage of development. However, the blooming stage of the crop is also comprised due to water stress.

Our reservoir is fully empty so as the river where authorities prohibited any water pumping. Our operating team is expecting now yields in a range of 1t/has to 3t/has for the 1^st block sowed – meaning 1,500 t of paddy in the best scenario. All rice producers along the river Tebicuary are in the same situation; some are even worse as they sow they entire forecasted surface and will have to abandon it as they did not have water reserve’s like us to mitigate the shortage in water registered over the last months.

We are taking advantage of the very low river level to deepen the entrance to the channel so as more water can in future access the pumps.

Market: Brazilian and Paraguayan mills are still looking actively for product, driving paddy prices to peak level ($280/$290 per ton). However, production will only start to be available by end of January for some producers, except for those who stored their previous harvest. Paddy prices are expected to remain at peak level this year but we cannot predict if we have entered in a new cycle of commodities or if the current situation is related to COvid-19 and a ought climate . Last October, South America experienced its 2^nd most intense drought in almost 2 decades.

Weather: The situation has become complex as the drought is emphasising: For October, we registered only 2 small rains of 20 mm each whereas it’s generally raining 255 mm on average. Temperatures are over 40°C and strong winds increase the number of wildfires in the region. Argentina, Brazil, Bolivia, and Paraguay are mainly affected, especially the region between the Paraguay, Parana, and Uruguay rivers have become critical. The forecast through December indicates that water deficits will shrink considerably. Severe deficits are forecast in Brazil from Mato Grosso do Sul through São Paulo State, in Paraguay and in the northern region of Argentina.

Sowing: We have completed the sowing of our 2^nd block, bringing to 1,000 has the surface cultivated. For now, we have decided not to sow our last block of 550 has budgeted given the water shortage w are facing.

Irrigation: We have been forced already to use our water reserve from our artificial lake to irrigate our 1^st block of 540 has sowed in September and as you can see, the fields are so far in good condition and the paddy is emerging nicely.

However, our artificial lake will soon reach its critical level and we will no more be able to pump any water from there to irrigate the fields. On the video taken at the re-pumping station, you can see the little water still remaining in the lake. Reaming water will be allocated in priority to the 1^st fields sowed.

To save water as much as we can, we only perform some pulse irrigation with one pump in order to keep the soil in the rice fields muddy and not to affect vegetative development of the rice plants. There is nothing else we can do as we need dense rains to recover water in the lake and in the river. If the situation continues, yields and quality of the rice will be affected, especially in the 2^nd block sowed.

As mentioned in our previous posts, dryness is causing concerns in Paraguay and not only for rice producer like us. For now, the Paraguay River has reached its lowest level in half a century after months of extreme drought in the region, exposing the vulnerability of landlocked Paraguay’s economy. Around 85% of Paraguay’s foreign trade is conducted via the river, which has been depleted because of a lack of rainfall in the Pantanal area of Mato Grosso state in Brazil.

The fall in the water level has slowed down cargo vessel traffic on the Paraguay River, causing significant cost overruns for the transport of fuel, fertilizer, food and other imported goods. The crisis has also exposed the precariousness of Paraguay’s access to drinking water. Losses in Paraguay’s river transport sector have already reached $250 million. The navigation situation is critical and getting worse day after day as the river is going down at a rate of 3 to 4 cm per day. In a week, no boat will be able to reach Asunción…You can see the situation of the Paraguay River near to Asunción as of October 8.

As our farm is situated along the river Tebicuary (a tributary to the Paraná River), the situation is even worse in terms of water availability, and our business is highly depended on water (water pumped from the river should be kept standing in the rice field throughout the growth period). Water in the river has now reached such a low level that authority decided on October 8 to prohibit water pumping from the river (Official Notice).

The situation is becoming worrying for all rice producers. As you can see, water is almost no more able to reach the entrance of our main pumping station next the river. In our case, we already started to irrigate our 1^st block sowed by using our water reserve from our artificial lake. Soon we will have completed the sowing of our 2^nd block (so, around 1,000 has in aggregate) which will need to be irrigate during 90 days. However, no more water will be available in our reservoir and we will face a complex situation to maintain our production growing and in good shape. We will also have to evaluate if we will run the risk to sow further (3^rd block of around 550 has) as we have already water shortage for the existing fields sowed.

15-Day Forecast Precipitation (% of normal) – Beginning October 9.

Some minor rains are forecasted between October 14 and 15, which will helps to low down evaporation and naturally irrigate the fields for 1 or 2 days. According to the latest forecasts, 30 to 40 mm of cumulated rains should be registered in the coming 15 days. To be continued…

Weather: The situation has not changed and we are worried about the water shortage we are already suffering from. No rain occurred since we have started sowing on August 27 and contrary to last year, we did not record the usual rains in July/August.

Currently, the low water level of the river Tebicuary (below 2 meters) doesn’t allow us to pump to irrigate the fields and we have to use already our water reserve of our artificial lake. We can mitigate some shortage for a given time but not for the entire irrigation cycle of the full area. We believe our biggest challenge this year will be to manage water availability so as all producers.

Most weather models are now pointing toward the development of La Nina phenomenon by October and persisting into maybe early 2021. This is bad news for farmers in South America because it would coincide with planting and crop development. La Nina is generally associated with dryer than normal weather in Argentina, Paraguay and southern Brazil.

Sowing: We have completed the sowing of block G (538 ha) and we have started irrigation of the field by using water of our reservoir. On October 1^st, we have restarted with the sowing of our 2^nd block of 427 ha. Once this 2^nd block will be completed, we will evaluate the situation because if no rain occurred, rice development will be affected and it will be highly risky to sow another block (low yield and quality).

Paddy rice is strongly influenced by water supply and water should be kept standing in the field throughout the growth period. Continuous flooding helps ensure sufficient water (elimination of moisture stress and favourable micro-climate to crop production) with greater availability of nutrients such as phosphorus, iron and manganese and control weeds.

Market: Weather uncertainties combined with covid-19 fears should not reduce rice prices anytime soon. The next harvest will come after February next year, and until then the only solution would be to import the product. However, the current scenario is not a parameter for the future, since after the end of the pandemic the demand for rice may change.

Sowing: On August 27, we began with the rice sowing period and started to sow block G (540 ha – in yellow). Our objective for the cycle is to sow our so called “base” surface of 1,600 ha and the production is dedicated 100% to IRGA 424 cultivation.

Our strategy is to sow in 3 stages the full surface allocated to paddy rice production. This way, we can have a harvest in stage and reduce our operating risks (weather issues and irrigation restrictions) while we will have a better control of the plots as they are not going to be all in the same stage at the same moment.

Weather: Our biggest concern is the forecast of “La Niña” climatic phenomenon. Already, we registered less rains than usual during its peak period (July/August) and the forecast are not encouraging. We need water to irrigate the field after sowing occurred. We can mitigate some shortage thanks to our reservoir but not for the entire irrigation cycle of the full seeded area. For this reason, we are also sowing in stages in order to have not all the surface at the same time under irrigation. But likely, our biggest challenge this year will be to manage water availability so as all producers.

Market: Locally paddy rice price rise recently in Brazil (+17% month on month in real). The weakness of the real, which reached a record low at 5.89 per dollar on May 14, has sharply increased the competitiveness of Brazilian paddy exports. Additionally, extremely tight paddy stocks in the US South have meant that Brazilian exporters have faced little competition selling to Central America and Venezuela this year. During the first half year, exports went up by 79% year on year. Meanwhile, the weak real has hindered imports, which went down by 12% year on year during that period. So Brazilian mills are now buying from neighbouring countries (Paraguay, Argentina and Uruguay) to supply the domestic market and protect their market share. This drives up paddy prices.

Brazilian average paddy prices 2019/2020 (USD/t – Rio Grande do Sul)

Source: ESALQ

Furthermore, international rice prices are also following currently this trend. The price of rice which is a staple food in Asia, has rencently hit 7-year highs due to the Covid-19 outbreak as importers rush to stockpile the grain while exporters curb shipments. According to Reuters, rice prices are now at their highest since late April 2013. The rise in prices is due to expectations of higher demand for Thai rice after fellow top exporters India and Vietnam both facing export disruptions due to Covid-19. Labour shortages, logistical disruptions and the importance of rice as a staple food have leads to export curbs.Earlier this year, North America, Europe and China faced also labour shortages and supply line disruptions during their spring planting due to the pandemic. All those factors explain the recent boom in rice prices. We hope that we are going to benefit from those prices when our harvest will be completed in March/April 2021.