Paraguay’s Record Soy Harvest Overshadowed by Geopolitical Risks and Debt Pressures

Record Output, Familiar Financial Strain

Paraguay has just harvested one of the largest soybean crops in its history, crossing the 12-million-tonne mark for the first time. The milestone was confirmed by Héctor Cristaldo, President of the Union of Production Guilds (UGP), who described the season as an excellent year for production.

Yet that bumper output masks deep financial pain. Cristaldo warned that profitability remains under severe pressure from the same forces that have been buffeting global agriculture for two years: volatile commodity prices, sharply higher input costs, and now a new layer of uncertainty driven by geopolitical tensions. “It was a good year from a production standpoint,” he said. “But financially, we had complications – high costs and very volatile prices.”

The sector is still paying for the devastating 2022 drought, which slashed output by 80% and forced many farmers to refinance their debts over a five-year period. Those repayments will weigh on balance sheets until 2027. At the same time, a persistent drought in the northern departments of San Pedro, Canindeyú and northern Caaguazú has now lasted four years, creating a stark regional divide in the health of the soy belt.

As the next planting season approaches in September, with an expected area of 3.6 million hectares broadly in line with the previous campaign, producers will once again be betting on weather and markets – two variables they cannot control.

Why Geopolitics Has Become a Key Variable for Paraguayan Soy

The Debt Overhang from 2022’s Drought

Many Paraguayan soy producers are still carrying the legacy of a once-in-a-century drought that wiped out 80% of the crop in 2022. Refinancing agreements stretched loan repayments over five years, meaning farmers are simultaneously financing the current crop while servicing old debts. Even a record harvest may not generate enough free cash flow to comfortably cover both, especially when prices dip.

Geopolitical Spillovers into Fertiliser and Freight Costs

Cristaldo singled out geopolitical shocks as a factor that “did not exist two years ago” but has now become a daily crisis variable. He traced the chain: the Russia-Ukraine war disrupted grain and energy markets; trade tariffs have since escalated; and the Iran-Israel conflict has pushed oil prices 42% higher, with Brent crude climbing above US$88 per barrel. That rise feeds directly into the cost of fertilisers, which have surged since the Middle East tensions began, and into freight rates – making it more expensive to move soy to global buyers. The net effect is a margin squeeze even when the crop is large.

The North-South Divide in Soy Fortunes

While the overall harvest was record-breaking, the situation in Paraguay’s northern growing regions is far bleaker. A drought that has persisted for four straight years has depleted soil moisture and crop yields, leaving producers there in an even more precarious financial position. This internal imbalance means national output figures mask localized distress, and the sector’s recovery will not be uniform.

Climate Outlook for the Coming Campaign

Looking ahead, early climate projections point to a possible El Niño event. Cristaldo noted that moderate rains could be beneficial, as long as they do not arrive during harvest or turn extreme. However, the sector’s overriding fear remains another prolonged drought. With weather models offering only probabilities, not certainties, producers will again be planting into a high-stakes environment.

What Soy Producers Need to Watch in the Months Ahead

For Paraguayan soy producers and agribusinesses, the following steps are anchored in the specific warnings from UGP’s Cristaldo:

• Price input procurement around geopolitical flashpoints. The recent jump in fertiliser and freight costs is directly linked to Middle East tensions and oil price spikes. Forward-buying strategies or diversifying supply sources ahead of the September planting could mitigate exposure to sudden cost shocks.
• Reassess debt service capacity. With debt repayments from the 2022 drought continuing until 2027, even a record harvest may leave thin margins. Producers should model cash flows under multiple price scenarios – particularly a dip in soybean prices – to ensure they can meet upcoming instalments without refinancing further.
• Monitor the El Niño forecast closely. The possible arrival of El Niño is the most specific climate signal available. If it brings moderate rains at the right time, yields could benefit; if it intensifies or hits at harvest, it could damage the crop. Field-level planning should account for both scenarios.
• Factor in the northern drought’s lingering effects. For operators in San Pedro, Canindeyú and northern Caaguazú, soil recovery will take more than one normal season. Crop rotation, moisture conservation techniques and selective input use may be necessary to restore profitability in those regions.