Analysis: Perfect storm in the countryside causes record drop in agricultural GDP

Agriculture promised to give a new boost to the GDP (Gross Domestic Product) this year, but it reaches the third quarter as one of the main obstacles to the general growth of the economy.

The sector has a record drop of 9% for this period, compared to the third quarter of 2020, and accumulates a decline of 0.1% in the year.

The data were released by the IBGE (Brazilian Institute of Geography and Statistics) this Thursday (2). The institute shows that the general GDP grew 4% from July to September, compared to the same period last year.

The result of agriculture is bad because the sector experienced a perfect storm in this harvest. In the agricultural sector, delayed planting, water crisis and frost prevented the expected super harvest for 2021.

On the contrary, the sector ends the 2020/21 harvest period with only 251 million tons of grains, according to IBGE figures.

Livestock, another important sector in the formation of the GDP, also did not have its best days. The most recent data from IBGE indicate that the slaughter of cattle in this third quarter was 11% lower than in the same period last year.

In addition to being affected by the drought, livestock had a strong reduction in animals for slaughter, which raised domestic prices, also helped by Chinese demand.

Milk intake dropped 5.1% in the quarter, and egg production, a substitute for meat, dropped 2.5%. The swine and poultry sectors, encouraged by exports, increased slaughter in the period.

The drought and several frosts that affected crops frustrated the prospect of a large harvest, especially in winter products. As a result, they ended up affecting the performance of agricultural GDP in this third quarter.

Corn was one of the main highlights in this fall, with a 21% reduction in production during the off-season period, the largest volume for the country. This reduced the total harvest for the year by 17 million tons, compared to the previous one, according to IBGE figures.

The 32% reduction in Arabica coffee production also weighed heavily on the formation of agricultural GDP. The crop, in addition to being affected by frost, which should reflect even more in the 2022 harvest, went through a negative biennial. In other words, after an abundant harvest, as was the case in 2020, the trees lose strength and produce less the following year.

The big problem for this year’s crop was the loss of productivity. In the case of corn sown in the off-season, the reduction was 26.5%, while the productivity of Arabica coffee dropped 28.5%.

Cotton, another important component of the agricultural harvest in this period of the year, had a reduction of 17% in production and 2% in productivity. The volume harvested was reduced to 5.85 million tons of the product in seed.

Sugarcane, also affected by drought and frost, had a 7.6% loss in production, which dropped to 626 million tons, and 5.2% in productivity.

The orange, according to forecasts made in October by the IBGE, loses 14% in productivity and in the volume produced.

The positive highlight in this period of the year was for wheat, whose production should reach 7.83 million tons, 26% more than in 2020.

The agricultural GDP will be far from the 3% projection, foreseen at the beginning of the year. The fourth quarter does not have any significant factor as a positive influence, with the exception of the pork and poultry sectors.

Domestic consumption and exports of these two proteins are expected to improve in this fourth quarter, due to year-end demand, but the beef sector continues to have supply restrictions.

Agriculture achieved an important participation of 6.8% in the formation of the Brazilian GDP in 2020. This percentage, however, should not be maintained in 2021.