Food reflects a drop in the field and retail deflation after 31 weeks of highs – 06/05/2023 – Vaivém

After 31 weeks of highs, the average price of food stopped rising and registered deflation in São Paulo. The drop in retail is just 0.01%, but it is already beginning to reflect the successive reductions in the field, a trend that was even more accentuated in May.

Several products in the field, such as cattle, soybeans and corn, fall to the lowest trading values ​​of the last two years. From 2019 to the end of 2022, food, driven by the high dollar and foreign demand, accumulated a 57% increase in Brazilian retail.

This year, with the domestic exchange rate and international prices more accommodating, food recedes in the field and becomes more accessible to the consumer. From January to May this year, the increase was much smaller — 2.2%.

The deceleration of domestic prices is also due to lower demand. Readjustments have been strong in recent years, prices have not returned to normal and consumers continue to have limited purchasing power.

The declines, however, affect products destined for export more, while domestic products, such as beans and rice, still rise, although at a slower pace.

Rice, after falling 0.54% in April prices, was 2.4% more expensive last month in supermarkets. In the field, prices fell 6.3% in May, which should be reflected in supermarkets in the coming weeks. The beans stopped rising.

In the accumulated result for the year, these two products still maintain increases of 8%, well above the average variation of other foodstuffs, according to data from Fipe (Fundação Instituto de Pesquisas Econômicas).

The volume of the Brazilian harvest also determines the behavior of prices in the domestic market. While rice production is the lowest in 25 years, corn and soybeans have never reached such high levels.

Such sharp declines in the field put the liquidity of producers in some regions of the country at risk. Corn, with estimates of a production of up to 130 million tons, had a drop of 18% in prices last month, according to Cepea (Center for Advanced Studies in Applied Economics).

The bag, which reached R$ 104 in March 2022 in São Paulo, is currently at R$ 54. Bad for the producer, good for the consumer. The recent increases in cereal prices have doubled the price of cornmeal and cornmeal in supermarkets. Now prices are starting to drop.

Soy, also with record production, estimated at 155 million tons, is going through a price adjustment in the field. The bag, which was at R$ 195 in Paraná a year ago, has dropped to R$ 128 currently.

The readjustment of oilseed prices led to a drop in soy oil and other derivatives. After accumulating an increase of 164% in the previous four years, oil is down 17% from January to May this year.

The downward trend also affects meat. The arroba of fat cattle retreated 10.4% in May. After reaching BRL 352 in March 2022, it ended last month at BRL 243, according to Cepea.

In addition to the Chinese market, the main one for the country, having been closed to purchases of this Brazilian protein for a month, due to the atypical case of mad cow, the supply of cattle increased in the first quarter, according to the IBGE. There is a greater discard of females.

The lower pressure on beef is also reflected in pork and chicken, which have drops in the field and in supermarkets. In addition to a greater supply of these proteins on the market, the consumer continues with restrictions on purchases.

The bun and wheat derivatives also ease the consumer’s pocket a little, according to Fipe. After the most acute phase of supply, which occurred after the invasion of Ukraine by Russia, external prices dropped and, internally, the mills restricted purchases. The Brazilian harvest was a record and the drop in prices in the field is starting to be transferred to retail.

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