Commodities Shuttle: High cost and sustainability demand will shape agribusiness in 2022

Next year will be a period of high costs, tighter margins and external demands for sustainability, but still with good prices and an increase in agribusiness exports.

This is a basic scenario projected by the CNA (Confederation of Agriculture and Livestock of Brazil) this Wednesday (8), when evaluating the performance of the sector in 2021 and outlining perspectives for 2022

Costs will surely be a big bottleneck for producers, especially during the off-season.

The exchange ratio of inputs for products is much worse, due to the increase in the prices of fertilizers and pesticides, according to Bruno Lucchi, technical director of the CNA.

This economic situation harms even more the producer focused on the domestic market, and that does not export. It produces with the high costs of inputs, already coming from the international market, and the dollar pressure on imports, which makes its activity even more expensive.

Brazil will have to live with the costs of logistics, energy, geopolitical crises, barriers in some countries and the costs of the high dollar.

Lucchi says that input prices will remain high until the second half, but the risk of a shortage is low.

The main market for Brazilian agriculture is still domestic, according to the director of the CNA. Macroeconomic numbers for next year, however, still show concern in some indicators. The Selic should be 11.25% per year and the unemployment rate will be at 11.7%.

The projection of the national GDP indicates little expansion, only 0.5%, and, in addition, it will be an election year, which makes the economy more uncertain.

Regarding the elections, the president of the CNA, João Martins, says that the organization does not do party politics, but class politics. It points out to all candidates the deficiencies of the sector and the need for course corrections so that agribusiness becomes more competitive.

Martins emphasizes, however, that each one has their own political preference and that the sector was close to that government, but through the Ministry of Agriculture.

Lucchi also highlights other points of attention for agribusiness: dollar fluctuations, difficulties in resuming domestic consumption and new Covid variants.

In the international area, the sector did well this year, reaching a record US$ 111 billion exported from January to November. The good performance may continue next year, according to Lígia Dutra, director of International Relations at the CNA.

External demand is good, and prospects for exports are positive, according to her. The country needs, however, to seek new markets and increase product diversification. Fruit exports, which should reach US$ 1 billion this year, are an example.

With regard to meat, one of the main current concerns of agribusiness, due to the interruption of purchases by China, Dutra says that there can always be problems with those in the market.

The important thing is to look for new partners, and she cites the great expansion of the sector in exports to the United States and Chile.

Regarding the need for market diversification, it is necessary to advance the agenda for Asia and other countries, such as Russia, a large meat importer from Brazil in the past, and which is back.

Despite this moment, the director of the CNA highlights the potential of meat exports to China, which has a population with an increasing consumption of animal protein.

Brazil cannot, however, only focus on large-volume products, such as soy and meat, but it needs to know better the markets in which it operates and explore new niches. This is the case of the increases in exports of honey, beans and sesame that occurred this year.

One point that makes the country difficult is its insertion in the world market. Brazil has only 1% of world trade, which means that the movement of ships through here is small. In agribusiness, the participation is 7%.

The CNA director warns that the environmental discussion will increasingly enter into world trade. Before, it was a matter for the European Union, but now other countries are adopting a similar posture to the Europeans.

What the country needs to check is what sustainability requirements really are and what are mere trade barriers, she says.

According to the organization’s president, CNA defends sustainability issues, but not producers who act illegally. These are police cases.

Until November of this year, the five main importers in Brazil had generated 62% of the revenues obtained by the country. China, in the lead, imported the equivalent of US$ 38.9 billion, an increase of 19.8% in the period.

For next year, the CNA forecasts the GDP of agribusiness between 3% and 5% and that of agriculture at 2.4%. Rural insurance, which the sector expects to reach R$ 1.3 billion in 2021, should reach at least R$ 990 million in 2022.

The VBP (Gross Production Value) will have a growth of 4.2%, below the evolution of previous years, and will be R$ 1.25 trillion.