Commodity Shuttle: Brazil will lose rice self-sufficiency and will have to import, says analyst

In a few years, Brazil will no longer be self-sufficient in one of the main staples of the daily diet of Brazilian consumers, rice. The scenario of recent years indicates this.

The forecast is from Vlamir Brandalizze, consultant and specialist in the grain sector. In his assessment, there will be, more and more, a substitution of the rice crop for the more profitable soy crop.

Brandalizze says that low prices and few remunerative rice farming keep producers away from the activity. Brazil, according to him, has one of the lowest prices in the world for this cereal.

It is no use for the government to eliminate the import tax, since prices here are lower than those on the foreign market. Rice from abroad will have obstacles to reach the Brazilian market, he says.

Much of this likely shortage of domestically produced rice will occur due to a game of internal forces. Retail competition increases, with repercussions on the industry and on producers.

Retail is highly concentrated, industries must go through a new phase of concentration, with a reduction in the number of small ones, and smaller agricultural producers leave the activity, leaving only those with the greatest breath in production.

The farmer even had a breather last year, when a bag of cereal came to be traded close to R$100 for a period of the year, but it has already dropped to R$70.

The difference now is that production costs are quite high, with no horizon for reduction. For Brandalizze, rice production is a very expensive activity, especially irrigated. Internally, the sector is influenced by the rise in fuels, energy, fertilizers and other chemical inputs.

Externally, the Brazilian product is cheap, but it is not competitive in the foreign market due to the high cost of maritime transport. In addition, the dollar below R$ 5 inhibits exports.
For the consultant, the country has seen this story before. Brazil was once less dependent on wheat, but low domestic prices and rising imports have reduced domestic production. Only now, with the recovery of prices, the offer should increase.

The same goes for fertilizers. Taxation and internal costs led the country to increase foreign purchases, making this current dependence very dangerous.

Production costs are high all over the world, but the taxes paid by Brazilian competitors are less than a third of what the national producer pays in the commercialization of goods and in the purchase of inputs.

This is an item that depends on public policy. Contrary to what the governments think, the tax reduction will not affect the collection, since it increases consumption in several sectors, says Brandalizze.

In addition to paying more to produce, the national producer receives less. A ton of rice is worth between US$ 260 and US$ 270 in Brazil; from US$ 300 to US$ 320 in Paraguay; and US$ 300 in Thailand, considering products of the same quality.

According to him, a kilo of rice costs US$ 0.60 for the national consumer, a value lower than the US$ 0.85 to US$ 1 in other countries.

An internal reduction in production already in the next harvest would bring a scenario of difficulties for the consumer. The world supply will be smaller, and the demand will grow.

A scenario outlined by Itaú BBA analysts points to costs limiting the expansion of area in the next harvest. The exchange ratio between cereal and urea, the main fertilizer used by the crop, is one of the worst in recent years.

In the international market, India, which is important for cereal exports, is experiencing a period of drought and will have reduced production of rice and wheat. Smaller inventories will drive up prices.

World rice consumption increases to 772 million tons in the next harvest, and ending stocks fall to 278.2 million, according to data from Usda and Itaú BBA.

This year’s Brazilian crop will be reduced to 10.7 million tons. With that, there are four harvests that the national production is below 12 million tons.

National consumption, which was 11 million in 2020/21, drops to 10.8 million this harvest, according to Conab data.