Superharvest and exports boost agribusiness – 03/29/2023 – Market

Despite all the obstacles to the supply of inputs and costs experienced by agriculture in 2022, and which still extend into this year, the scenario for 2023 is still one of profitability for the producer.

Commodity prices are falling, but the indication of a super harvest and the good Brazilian participation in the external market compensate the price retraction.

Agriculture is always made of hopes — which, many times, are not confirmed. However, there is confirmation this year that will indicate robust numbers for the sector.

The grain harvest, if the weather helps, will reach 310 million tons, which will generate gains of R$ 1.25 trillion for producers inside the gate, according to estimates by the Ministry of Agriculture for the VBP (Gross Production Value) .

This good scenario in the countryside will increase the GDP (Gross Domestic Product) of the sector, which is important in moving the economy, and will allow for new advances in the agribusiness trade balance.

However, the Brazilian performance also depends on the foreign market.

Demand remains consistent, but high interest rates, high inflation and the slower pace of the world economy could affect both demand and food prices.

After a period of disarrangement of values, production and international commercial exchange, the market is more adjusted this year.

Investment funds, however, with aversion to risk, participate less in the agricultural commodities sector, which helps to further slow down international prices.

China, Brazil’s main partner in the area, is experiencing a different situation compared to previous years. With a great need for raw materials, the Asians approached the Russians.

Chinese access to cheaper inputs in the Russian market is convenient, but China is dependent on sales to markets in the United States and Europe, currently on the opposite side of this war in Eastern Europe.

If more accessible raw materials are important for the growth of the Asian country’s economy, the effects of this position may interfere with international trade.

Within this context, it is important to assess whether the performance of the Chinese economy interferes with Brazilian exports, says Andreia Adami, researcher and analyst at Cepea (Center for Advanced Studies in Applied Economics).

The researcher still believes in the growth of Brazilian agribusiness exports, but not at such an accelerated pace as in recent years.

In 2000, Brazilian agribusiness exports totaled US$ 101 billion (R$ 518.4 billion), a volume that rose to US$ 120.5 billion (R$ 618.5 billion) in 2021 and reached US$ 159 billion (R$ $816.12 billion) last year. The growth was 58% in the last two years.

Brazil will have some strong points in the external sector this year, mainly with soybeans, corn and meats. The availability of products for export will be greater, although prices are lower, says Adami.

Soy complex exports alone (grains, bran and oil) should reach US$ 66 billion this year, according to calculations by Abiove (Brazilian Association of Vegetable Oil Industries). The sector accounted for 38% of foreign agribusiness sales in 2022, according to Secex (Secretary of Foreign Trade).

The GDP of agriculture improves, but it depends on who makes this assessment. The growth could be 11.6% according to Ipea (Institute of Applied Economic Research). In 2022, there was a drop of 1.7%.

According to Cepea’s evaluation, however, there is no reason for great optimism with the evolution of this indicator in 2023.

There is no contradiction between the assessments. With data from the IBGE (Brazilian Institute of Geography and Statistics), Ipea monitors production inside the gate and considers only the volume achieved by producers in the period. And, this year, Conab (Companhia Nacional de Abastecimento) expects an excellent production volume.

Ipea’s growth forecast for the GDP of vegetable production is 14.2% this year. Livestock stands at 0.8%.

The GDP survey carried out by Cepea in partnership with the CNA (Confederation of Agriculture and Livestock of Brazil) encompasses all agribusiness.

In addition to production inside the gate and the prices of goods, it takes into account all agribusiness, including inputs, agroindustry and agroservice.

Nicole Rennó, a researcher at Cepea, says that, although the harvest has good perspectives, the growth should not have an impact on the final GDP result.

The components of this indicator depend on demand, which is weak, and on the evolution of the national economy, which is slow and under the effect of high inflation.

For Bruno Lucchi, CNA’s technical director, agriculture has several favorable points this year. The climate, with the exception of some areas in Rio Grande do Sul, is one of them and has helped national production.

Production costs are more favorable, although still at levels higher than the average of previous years.

Fertilizers, after the price peak in May last year, have fallen. They started the year with a reduction close to 30%, compared to January 2022 values. Current prices still exceed those of the period prior to the invasion of Ukraine by Russia.

The harvest is good, but commodity prices are falling. The values ​​of March for soy, corn and arroba of fat cattle have a retraction of 20% in this month, compared to March 2022, says Lucchi.

This reduction in prices will generate less income for farmers, mainly because there are no grounds for a recovery in commodities.

Producers also encounter difficulties with credit this year. Interest rates are high, and the cost of money exceeds 20%. High interest rates, a crop with high production costs and falling commodities put a brake on investments in the sector, according to Lucchi.

This year, producers are also concerned about tax reform. The current proposal does not guarantee that agribusiness will have differentiated rates. The sector does not want a subsidy, but different rates, says the director.

The evolution of agribusiness has been increasing the number of workers in the sector. Last year, the employed population was 19 million, a number that should be maintained this year.

The data is from Cepea and shows a recovery of the staff after the pandemic. In 2020, the number had retreated to 17.5 million.