Brazil is facing the worst drought in 91 years. The water storage capacity of a large number of domestic water supply reservoirs has bottomed out, and it has even affected the production of crops such as corn, soybeans, and coffee, which may threaten the food security of Brazilian citizens. According to data from the Brazilian Research Institute, less than half of the people can continue to get adequate food, and about 19 million people will face hunger.
Affected by the once-in-a-hundred-year drought, the prices of agricultural products, food, and electricity in Brazil have all soared, which directly caused the inflation rate to “explode.” In May 2021, Brazil’s CPI surged by 8.06% annually, which was more than twice the 3.75% inflation target of the Brazilian Central Bank. In order to curb inflation, the Brazilian Central Bank raised the benchmark lending rate by 75 basis points to 4.25%. This is the third rate hike in the year. .
What the market is worried about is that, as the “world’s granary”, once this drought in Brazil continues, it may trigger violent fluctuations in global agricultural prices.
Brazil suffers from a drought of once in a century
The leaking of the house happened to rain overnight. After being hit by the epidemic, Brazil encountered a drought of once in a hundred years.
Earlier, the Brazilian government sounded a water scarcity warning and classified it as a “serious” category. This is the first time Brazil has triggered such a warning since 1910. Brazil is facing its worst drought in 91 years.
November 2020 to March 2021 is the rainy season in Brazil, but rainfall has fallen to its lowest level in decades. Brazil is still in the rainy season, but the water storage capacity of the Paraná River Basin is already stretched. Many reservoirs hold less than 50% of the normal water capacity, and some upstream reservoirs even have only 10% water storage capacity, which is almost dry. The water level of the Cantareira Reservoir, which supplies water to 7.5 million people in São Paulo, fell below 1/10 of its capacity.
Once it enters July, all parts of Brazil will enter the dry season, when the country’s water shortage pressure will be even greater. The latest emergency drought warning issued by the Meteorological Monitoring Service of the Brazilian Ministry of Agriculture predicts that rainfall in five Brazilian states from June to September 2021 may still be scarce.
On June 19, the Financial Times cited local farmers as saying that due to lack of water in the soil, the harvest of sugarcane, soybeans and other crops on the land will be severely affected this year.
In recent years, Brazil’s agriculture has developed rapidly and has become the backbone of the country’s economy. Agriculture accounts for about 30% of Brazil’s GDP. At present, Brazil is the world’s largest supplier of sugar, coffee, soybeans, and oranges. Both legumes and tropical fruits account for the top 3 in the world.
Once the drought continues, it will significantly reduce local crop production and even threaten the food security of Brazilian citizens. According to data from Brazilian research institutes, less than half of the population can continue to get adequate food, and 19 million people (9% of Brazil’s total population) will face hunger.
Regarding the cause of the drought in Brazil, climate activist Marcelo Laterman of the Brazilian branch of the environmental organization Greenpeace said that in 2020, the deforestation of the Amazon has soared to the highest level in more than a decade. This is directly related to the drought because of the water cycle of the forest. The system plays a vital role in the distribution of rainfall in South America.
For the past 20 years, Brazil has been deforestation and widening the area of arable land. The area of local arable land has been increasing at an annual rate of 1.84%, from 34.4 million hectares to the current 49.5 million hectares in just a few decades. , Brazil has transformed from a food importing country to a world granary.
Brazil’s inflation rate is soaring, the central bank raises interest rates urgently
The drought, which has not been seen in a century, has not only severely affected Brazil’s crop harvests, but also caused a shortage of electricity supply in Brazil.
At present, hydropower accounts for about 65% of Brazil’s total power generation, and this once-in-a-century drought has led to a sharp drop in local hydropower generation, forcing people to use more expensive thermal power. According to agency forecasts, Brazilian companies and Residents’ electricity prices have risen by as much as 40%.
Luis Carlos Siochi, general manager of Brazil’s National Electricity Dispatching Center (ONS), said that Brazil’s driest rainy season has had a serious impact on hydropower stations, which are Brazil’s main power sources, and Brazil’s power system will face huge cost pressures until 2022. .
The once-in-a-hundred-year drought caused the price of agricultural products, food and electricity in Brazil to soar, which directly caused the local inflation rate to “explode.” In May 2021, Brazil’s CPI surged by 8.06% annually, more than twice the country’s central bank’s inflation target of 3.75%, the largest increase in the past five years and far exceeding market forecasts.
Reprint indicated source：Spark Global Limited information