Government wants warning system against high food prices – 03/22/2024 – Market

The Luiz Inácio Lula da Silva (PT) government wants to create an alert and monitoring system to detect in advance the risks of crop failure and adopt measures to avoid or mitigate rising food prices.

The Executive also wants to offer a cheaper rural insurance option in the next Harvest Plan as a way of stimulating agricultural producers.

The price of food is one of the factors of concern for the president, especially at a time when his popularity is falling.

A survey released by Ipec at the beginning of the month showed a worsening in Lula’s approval ratings. This Thursday (21), a Datafolha survey showed that the government’s approval was technically tied with the rejection of its government.

Minister Paulo Teixeira (Agrarian Development) said that the system is still being developed, but the idea is that it serves as a kind of trigger to activate stimulus mechanisms.

“Did you feel that the price of beans might get expensive? From now on we can make a purchasing option for the beans. Tell the farmer: ‘Plant and we’ll give you this price here, you won’t lose’. If you get a price of market higher than the price I’m giving, sell it to the market. If not, sell it to us. These are guarantee incentives”, he stated.

The Executive already has information on harvest surveys carried out by Conab (National Supply Company) and IBGE (Brazilian Institute of Geography and Statistics), in addition to weather forecasts from Inmet.

The minister, however, said that it is necessary to “calibrate” them so that the government can detect these events, measure possible impacts on the price and act quickly, in an integrated manner.

“There must be a very sharp mechanism, due to climate change, for measuring prices, forecasting the harvest and activating stimuli to maintain the food supply,” said Teixeira this Thursday, after an event promoted by Conab.

The formulation of the alert system is being discussed with Conab itself, with Mapa (Ministry of Agriculture, Livestock and Supply) and with the SPE (Secretariat of Economic Policy), linked to the Ministry of Finance.

“What we would like, at this time of climate extremes, is to build an information bank that allows us to anticipate possible problems in a specific harvest and think about what actions we can take”, said the Secretary of Economic Policy, Guilherme Mello.

According to him, inflation indices capture the average dynamics of food prices, but local reality can vary greatly. “So, the same policy will not necessarily work [em diferentes regiões]. There may be crop failures in one place and not in another,” she said.

Mello said that the alert and monitoring system is under discussion, but there is still no deadline for it to start working.

Conab is already carrying out 12 harvest surveys (one per month) of the 16 main grains produced in the country. The body’s president, Edegar Pretto, stated that the objective is to “enhance” the reach of the projections and their use by the government.

“We want to better organize this public data,” he said. “The president’s request is that we find mechanisms to move in the same direction.”

Although there is no deadline for the inauguration of the system, Teixeira said that there are other mechanisms under discussion to improve conditions for food producers.

“In the Safra Plan, we will increase financing and reduce the value of insurance [rural] for food production. So, this is the most important stimulus, which is closest to us, which is in the month of June [quando ocorre o lançamento]”, he stated.

Mello said that there are also conversations to help producers who took credit to purchase machinery and equipment at a time of rising prices and are now in a difficult situation due to the drop in prices, which reduces sales revenue.

“There is a mismatch between costs and revenues,” said the secretary. “The measures we are discussing, both the Harvest Plan and investment credit, do not change the outlook for the current harvest, but they can help the sector for the coming years.”

The government’s concern about food prices was the topic of two meetings between Lula and his assistants last week. After a benign result in 2023, these articles began 2024 weighing on consumers’ pockets.

The accumulated increase of 2.34% in these articles between January and February was one of the main factors behind the accumulated variation of 1.25% in the IPCA. The government believes this is a point of attention, especially given the need to increase acceptance of the government among women, including evangelical women.

Despite the concern, the government sees a downward trend in food prices and expects this to be passed on to consumers by April.

In the case of rice, whose production was affected by the floods in Rio Grande do Sul, the expectation is that the price reduction will occur in the coming weeks with the intensification of the harvest.

Mello said that the acceleration of food is “very concentrated in some products” affected by weather conditions and also by changes in the international market.

“Our projection continues to be a slowdown in food prices [consumidos] at home. The crop has started to be harvested, and, as a result, prices have already been falling,” he said.