(NDAgConnection.com) – Argentina’s two major grains exchanges cut their forecasts for the upcoming wheat harvest on Thursday as drought and low temperatures hit the crop, with little relief in sight for key farming regions and scant rains forecast in weeks ahead. A senior analyst at the key Rosario grains exchange, Cristian Russo, told Reuters that the 2022/23 wheat harvest would likely come in at 16 million tonnes, a 500,000-tonne cut from the entity’s previous formal forecast.

A separate 2022/23 wheat crop estimate also issued on Thursday, from the Buenos Aires grains exchange, forecast a harvest of 16.5 million tonnes, down from the exchange’s prior forecast of 17.5 million tonnes.

Argentina is a major exporter of wheat and its role in global markets has come into greater focus amid a worldwide supply crunch linked to Russia’s invasion of Ukraine. Both countries are major wheat producers.

The Rosario exchange wheat forecast would mark Argentina’s smallest crop in seven years and far below last year’s record production of 23 million tonnes.

Rosario grains exchange analyst Russo told Reuters the lower expected yields are the result of months of scarce rainfall plus additional damage from a recent late season freeze.

Argentina is also the world’s top exporter of processed soy oil and meal and the No. 3 for corn. Its grains exports are the main source of revenue for the cash-strapped government struggling to contain surging inflation seen hitting 100% by the end of this year.

Reuters reported on Wednesday that government officials will meet with wheat millers and exporters later on Thursday to discuss worries over the wheat crop and potential shortages for the domestic market.

The country’s producers have already formally declared overseas sales of 2022/23 wheat of 8.85 million tonnes, official data show. There is an existing export cap of 10 million tonnes for the season’s wheat harvest.

Used largely to make bread and pasta, domestic wheat consumption from the 2021/22 harvest totaled 7.6 million tonnes, government data show.