Commodities Shuttle: Omicron variant may bring new costs to production in the agribusiness sector

After a troubled Friday (26) in the commodities market, due to the new omicron variant, the market started to slow down again this Monday (29).

Classified as worrying by the WHO (World Health Organization), it is still unknown how this new variant will affect the population and the economy.

For agribusiness, if it really has a rapid advance around the world, it will be quite worrying, not because of demand, but because of the effect it has on production, logistics and infrastructure in countries.

Agribusiness will have no demand problem, as countries will continue to seek food security, shopping and maintaining food stocks.

If it poses a potential risk to economic recovery, agribusiness will have, once again, difficulties in replacing machinery and equipment and in supplying inputs, such as agrochemicals and fertilizers.

In this case, the pressure will come through new production costs, which are already quite accelerated this year. The main commodity importers are also major input suppliers, a sector on which Brazil is highly dependent.

Until the third week of this month, Brazil had imported a record 36.8 million tons of fertilizers, with expenditures of US$ 12.6 billion (R$ 70.7 billion, at the current price).

Disruption of this sector in some regions, due to the pandemic and energy and geopolitical issues, raised the prices of some of these inputs to the highest levels in a decade.

Among Brazil’s main suppliers, some countries were affected by these issues. Russia, with 7.7 million tonnes, leads the volume offered, followed by China, with 5 million, and Canada, with 3.4 million.

Belarus, which suffers sanctions from the European Union and the United States, is also on this list and has sent 1.96 million tons of fertilizers to Brazil this year.

A possible worsening of the pandemic in the world will also increase spending on pesticides. This year, imports already total 316 thousand tons, with expenditures of US$ 2.81 billion.

The main suppliers of these agrochemicals to Brazil were in the eye of the hurricane during the pandemic and had difficulties in delivering.

Among the main supplier regions were Asia, with 172,000 tonnes, and South America, with 69,000. North America and Europe supplied 28 thousand and 25 thousand tons, respectively.

The main food exporting countries, such as Brazil and the United States, did not have great difficulties in exports. Both are reaching record levels in world agribusiness trade.

But the United States still has localized problems in the flow of grain through some ports, due to the pandemic. There is great competition from container ships, making it difficult to ship grain, according to Daniele Siqueira, from AgRural. As a result, Brazil has advanced in soy exports, despite this period of the year being the ideal window for foreign sales for the United States, due to the end of the harvest.

Brazil exported 8 million tonnes of the oilseed in September and October, and sales in the first three weeks of this month have already surpassed by 125% those of the same period in November 2020.

Corn output is also heated, despite the 20 million ton drop in Brazilian production. This month, the country should reach foreign sales of 2.7 million of the cereal.

Even with some periods of difficulties in disembarking at destination ports, Brazilian and North American agribusiness exports reached record levels in these two years. In 2021, Brazil should reach the historic mark of US$ 120 billion in sector revenues.

The North Americans, on the other hand, after registering US$ 173 billion in the calendar year 2020/21, should reach US$ 177 billion in the 2021/22 period, according to the USDA (United States Department of Agriculture).