Commodity Shuttle: Higher prices make imports grow more than exports in agribusiness

From January to May, imports from Brazil aimed at agriculture added up to 30% of the revenues obtained from exports. In the same period last year, the percentage was 24%.

This calculation takes into account not only agricultural commodities, but also fertilizers, agrochemicals and agricultural machinery.

Agricultural commodity prices continue at record levels, but the evolution has been lower than that of products with higher added value.

Brazil is one of the world’s leading suppliers of commodities, but it is also a major importer of value-added products, such as agrochemicals.

International demand for commodities remains firm, and prices are also driven by lower inventories than in previous years.

The disruption caused by the pandemic and, as of February, the war between Russia and Ukraine in the economy and in international shipping, however, made the cost of inputs exceed that of commodities.

In the medium term, the scenario is not comfortable for the country. At the top of imports are products that Brazil will hardly have local production in the short term.

Spending on fertilizer rose to US$ 9.6 billion in the first five months of this year, 178% above the same period last year. Imports of pesticides reached US$ 1.74 billion in the period, up 94%.

In the list of imports, however, there are products that the country could improve productivity and even reverse this scenario of foreign purchases. Among them are milk, vegetables, fish, coconut, oranges and even water.

This pressure from imports will continue in the second half of the year. On the one hand, purchases of inputs are necessary to balance the demand for the next grain harvest. On the other hand, the country has been exporting less than expected by the commodities sector for two years. This is also one of the reasons for the greater share of imports in relation to exports.

In the second half of last year, it was the absence of corn in the trade balance. It was expected to export 40 million tons of cereal in the year, but the volume was 20.4 million, due to drought and frost.

In the second half of the year, soybeans will also have a smaller share than expected. Production, estimated at up to 144 million tons, was close to 125 million. Less for export.

Wheat should weigh on the trade balance in the coming months. Taking advantage of the prices of the first months of the year, Brazil exported 2.45 million tons of cereal until May, a record volume and well above the 568 thousand tons of the same period in 2021.

To complete domestic demand, the country should import 6.5 million tons this year. According to Secex (Secretariat of Foreign Trade), 2.57 million have already arrived.

Dollar and high prices, in addition to lower income in the country, hold back imports of industrialized and value-added products. This is what happens with olive oil.

The Brazilian presence was celebrated in the European market, due to the expansion of Brazilian purchases above the world average three years ago. In this one, Brazil reduced its purchases by 5%, but is paying 11% more.

In the industrial sector, global inflation and the lack of electronic components made Brazilian spending on imports of agricultural machinery and tractors rise 23% and 77%, respectively, this year.

The pace of imports in the agribusiness sector is much faster than that of exports, although the country has a good trade balance in the sector.

Total agribusiness exports already total US$ 63.98 billion from January to May, 29% more than in the same period last year. In the same period, however, imports rose to US$ 19.5 billion, 63% more than in 2021. The explosion in fertilizer prices is one of the factors responsible for this acceleration.

In the last 12 months, total agribusiness exports reached US$ 134.5 billion; imports, US$ 45.3 billion.