(Bloomberg) -- Argentina corn farmers had high hopes for this season’s harvest after near-perfect weather conditions ended years of drought. A record crop would also bode well for President Javier Milei’s plan to turn around the nation’s embattled economy.

Now a bug is getting in the way.

Corn farmers are seeing their fields ravaged by a plague of leafhopper insects. The infestation is slashing production potential for the world’s third-largest exporter of corn just as harvesting gathers speed. 

Swarms of the tiny insects — spreading a disease on plants called spiroplasma — have grown so vast across the Pampas crop belt that analysts at the Rosario Board of Trade will likely continue to trim their output estimate.

“There’s concern that the damage will keep increasing as the crop cycle progresses,” they wrote in a report, after calling the widespread impact of the pest “unprecedented.”

It’s a severe setback for a country still recovering from the worst drought in living memory. Farming is a huge component of Argentina’s economic activity, and its central bank desperately needs crop export dollars in the second quarter to boost its reserves of hard currency in order to scrap money controls.

The controls were designed to protect the peso, but they’re counterproductive for the broader economy. Milei, who’s served as president since December, has vowed to ditch them as he moves to free up business and lure investment.

Read More: Argentina’s Milei on Peso Plans, China and Trump

Argentina’s corn and soybean harvests are just getting started. Prospects earlier in the year were for a record corn crop of 56.5 million metric tons, but that forecast has since plunged 12% to 49.5 million, according to the Buenos Aires Grain Exchange.

There are also some problems for soy: Rains have been hampering field work, and delays to the harvest could reduce the quality of the crop, with subsequent discounts to prices paid by traders.

“If the forecast for more rains is right, the harvest pace will slow,” said Bruno Ferrari, a researcher at the Rosario bourse. “We’ll see damage from excess moisture, affecting quality, and potentially a cut to our national production estimate.”

Argentina is the world’s biggest supplier of soy meal and soy oil.

Deformed Corn

Meanwhile, attacks by leafhoppers are choking the internal workings of corn plants, causing deformities and ultimately reducing the number and size of corn kernels that farmers truck to ports.

In the prime swath of farmland, known as zona nucleo, average corn yields are expected to plunge by roughly a third, to six metric tons a hectare. Before the leafhopper plague, they were due to be around nine tons.

In powerhouse farming province Cordoba, production is now seen 26% lower than last month and is expected to keep falling, with month-on-month cash losses exceeding $1.1 billion, according to the regional grain exchange. 

In the northern province of Santiago del Estero, German Esponda, an agronomist from the town of Bandera, said the full extent of the damage hasn’t been computed. “This movie isn’t over yet,” he said.

Late-planted corn, which isn’t yet ready for harvest, is most affected. That’s bad news since two thirds of Argentine corn acreage is now late-planted, a strategy that’s developed to combat drier weather. 

“My latest corn, planted in January, was younger and weaker when the leafhoppers came, so those yields could fall by half,” said Daniel Calaon, a farmer in Serodino in the zona nucelo.

Calaon is also struggling to collect his soybeans because of the rains. “It’s too wet to get tractors in the field,” he said. “We may lose some acreage and it’s very likely we’ll see quality losses.”

Read More: Argentina Corn Harvest Forecast Cut 6.5 Million Tons on Pest

For Argentina, these curbs to production are compounding low global prices for both corn and soy. The combination will be detrimental to export revenue, with $4.5 billion wiped from the estimated value of Argentine crop shipments from December to March, according to Rosario. The revenue losses have grown in recent weeks as the leafhopper swarms intensified, said researcher Ferrari.

To be sure, smaller corn harvests in Argentina and neighboring Brazil haven’t yet been fully factored in at the US Department of Agriculture. When they are, it could fuel an uptick in corn prices that are trading at three-year lows, although demand is soft.

Further out, Milei’s plans to open up the economy could see headwinds from a La Nina climate pattern that’s forming in the Pacific Ocean. La Nina usually brings drought to Argentina and could shrink the 2025 harvest.

(Adds agronomist comment in 15th paragraph.)

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