After a long period of highs, prices have a sharp drop in the field – 03/05/2023 – Vaivém

After a period of good external and internal prices for commodities in recent years, agricultural producers live in a very different scenario. Both in the grain and livestock sectors, domestic prices have fallen to the lowest levels since 2020.

A combination of factors led to this decline. In the case of grains, mainly soybeans, producers bet on a continuation of high prices and stepped on the brakes on advance sales. The record harvest came true, there was a delay in the harvest and the delay in marketing helped to lower prices.

Daniele Siqueira, an analyst at AgRural, says that the declines in soybeans and corn were just due to internal factors. In the case of cotton, external effects had an influence. She points out that the current values ​​of corn and soybean contracts, traded in Chicago, and cotton, traded in New York, are still above the lows recorded in the first quarter of the year.

Slow marketing, delayed harvest and demand concentrated in China made buyers delay purchases, knowing that Brazil would have a lot of soybeans to sell, despite the crop failure in Argentina.

Siqueira claims that the strong slowdown in premiums paid in Brazilian ports was decisive for the drop in prices. They retreated to the lowest levels in 20 years. The stability of the dollar close to R$ 5 —at times even below that value— also reduced the appetite for sales by producers.

Corn, which also has expectations of a record harvest, suffers from soybean contagion, says the AgRural analyst. The commercialization of the off-season is late, the product offer is large and there is still a lot of soybeans to sell. Export premiums also drop.

For Lucílio Alves, researcher at Cepea (Center for Advanced Studies in Applied Economics), the falls occur due to atypical movements. Commodity prices did not rise as they should have in the off-season. Corn remained at prices without major changes from August 2022 to last March, and soybeans, after a small recovery, fell again.

The fact that the producer has not made advance sales forces the sale now, since it is time to pay the cost and harvest expenses. Even with the reduction in commodity prices, current data still indicate liquidity in the sector, since input prices have fallen, says Alves.

Bad for the producer, the drop in commodity prices is good for the protein sector, mainly for poultry and pork. This drop in costs will benefit the consumer, according to the researcher.

Average prices for live cattle at arroba also retreat to the 2020 level in the domestic market. Externally, inflation, high interest rates and the reduced supply of money in the market influence demand, affecting prices. Renegotiations by China, the main buyer on the foreign market, also affect international beef prices, according to Thiago Bernardino Carvalho, a researcher at Cepea.

Last month, the value of a ton of beef exported by Brazil was US$ 4,787, according to data from this Tuesday (2nd) published by Secex (Secretary of Foreign Trade). A year ago, Brazil traded a ton for US$ 6,208.

Carvalho points out, however, several internal factors for the drop in the arroba of fat cattle. One of them is the greater supply of cattle for slaughter. The abundant rain renewed the pastures and allowed the animals to gain weight.

Investments made in genetics and pastures in the last three years have also increased productivity gains in the sector.

Last month, Brazil exported only 110 thousand tons of beef, a volume below the average of recent months. Carvalho sees, however, a recovery in Brazilian exports. The country has potential for foreign sales of 150,000 tons per month, with some peaks of up to 200,000 tons.

With a lower level of prices, Brazilian exports are starting to reach new markets. Mexico’s opening is one of the most recent.

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