Analysis: Lula will face difficult times in agriculture

Agriculture, which has had its glory days in recent years, will enter a new, but worse, phase. And that depends on the new president. Of course, the fact that Luiz Inácio Lula da Silva (PT) is elected, who has practically the entire sector against him, becomes even more difficult.

In recent years, several factors have increased external demand for food, which has favored Brazil. In the livestock sector, diseases that spread across Asia, Europe and even the United States supported Brazilian meat in the foreign market.

These factors led Brazil to break records for exports and protein revenues. This scenario will not continue. China is relocating to production and will import less.

In the grain sector, the pandemic has caught the world with low inventories and import needs. Brazil had product, and prices were close to record levels. The result is expected revenues of US$ 150 billion from agribusiness exports this year.

External prices will continue at good levels next year, but with a downward trend. The uncertainties brought about by Russia’s war with Ukraine should be short-lived.
However, a new factor appeared in the scenario: the increase in production costs. And as world stocks are replenished, international grain prices will decelerate.

In addition to external uncertainties, producers will face a series of internal problems. Until now, investments in agriculture were made with lower interest rates and in a period of high income. From now on, it will be high interest rates and restricted income.

With a short budget, the government will find it difficult to guarantee credit for funding and resources to equalize interest rates. In a period of increasing climatic crises, rural insurance becomes fundamental.

There is a slowdown in the world economy. Food is always needed, but prices react in situations like these.

One of the outputs for Brazilian products, since the country has been achieving record after record in production, will be the reactivation of the domestic economy.

Lula will not have room to make strong shifts in agribusiness. Industry forces are very well established via Congress and associations. You will need a lot of dialogue.

The elected president, however, will have to untie several knots left by the current one. One of them is deforestation, crucial for maintaining external negotiation channels. Marina Silva (Rede) will play a key role in this matter.

Issues dear to Lula and the PT, such as indigenous and land issues, will certainly be a clash in the relationship with producers. The new government will have to rebuild the monitoring and control structures in the fight against land invasions, irregular mining and illegal logging.

Just separate the wheat from the chaff. The farmers themselves already admit that the issue of illegal deforestation and land invasions in the Amazon are cases of the police.

Clarity on these irregularities is essential. Europe has already shown that it will retaliate for exports from deforested areas, and the US promises to follow suit. Good to remember that they are always mirrors for other countries.

Campaign promise, and just like what happened in his previous government, small and medium producers, with less power to act, should receive special attention. The performance of the economy will be fundamental for this category, since practically all their production is in the domestic market.