Shuttle: Lula’s goal, lowering the price of food is a difficult mission in current conditions

President Luiz Inácio Lula da Silva highlighted in his inauguration speech on Sunday (1st) the need for a reduction in food prices — a difficult mission in the current conditions of the internal and external markets.

What the country needs is a change in agricultural policy. It should not inhibit Brazil’s participation in the international market, but also structure the domestic production of basic food products.

This structuring goes through terms condemned internally by many, such as the special granting of credit to certain production items, but which are necessary to replenish the food supply.

The producer, as in any other activity, seeks profit or income to continue his activity. The current export model, which is highly remunerative, makes the agricultural economy turn basically to exports, which even determine domestic prices.

Food prices and planted area numbers in recent years indicate the direction that Brazilian agriculture has been taking.

The average annual price per sack of rice paid to producers in 2022 was 3% higher than in 2020, according to data from Cepea (Center for Advanced Studies in Applied Economics).

In the same period, soy and corn, products focused on the export market, rose 59% and 50%, respectively. External demand and favorable prices made producers choose these products more than the basic ones.

The soybean planting area grew 24% in the last five years. Already the rice fell 26%; and beans, 13%, considering the same period. In addition, those farmers who have more technology and better structure survived in the planting of these basic products, leaving a large part of the small ones out.

The risks in planting these basic products are high, mainly because they are more subject to adverse weather conditions and the lack of insurance support.

Focused basically on the internal market, mainly beans and cassava, prices fluctuate a lot, depending on the internal offer. In periods of lower supply, prices react, but then fall when producers return to these products again.

Soybeans have maintained a more constant price. From 2019 to 2022 there were continuous increases, reaching an accumulated appreciation of 140% in this period in the domestic market.

The market is free, and the producer will choose the product that brings him the most income. In the short term, however, the incentive to produce basic foodstuffs involves a line of credit and differentiated interest rates.

The guarantee of income for small producers must also be complemented by an efficient distribution of products. One of the strong channels in the country are the cooperatives, in addition to the state superintendencies of Conab itself (Companhia Nacional de Abastecimento).

Both the credit policy and the distribution of food, however, must be well structured and stay away from the interests of politicians.

In the medium term, the agricultural policy must stimulate research, guaranteeing more resistant varieties, technical assistance to small producers and a mechanism for distributing products in the regions where they are produced.

A study by the CPI (Climate Policy Initiative), affiliated with PUC in Rio, shows that public policies aimed at small producers yield results, but they have to be linked to technical assistance.

Governments have been taking their eyes off small producers, who are responsible for much of the food production that currently causes inflation in the country. The budget is getting shorter.

Aid programs for small producers, however, are spread all over the world, from Europe to the United States. Each government has its peculiarity.

One of the strongest occurs in the United States, where the government, by maintaining food security for the lower-income population, stimulates production. In New York alone, there are 1.4 million residents within food insecurity.

Producers in the United States are beginning to discuss the country’s new agricultural law that will be in effect for the next five years, the so-called Farm Bill. The current one expires on September 30th.

Among the discussions are an expansion of assistance to small rural entrepreneurs; improve access to USDA (US Department of Agriculture) programs for the most needy producers.

The legislators of the new law also want subsidies to modernize the distribution and expansion of products in productive regions; reducing dependence of small producers on mega-companies; greater coverage of risks, mainly climate risks, and loss of product prices; long-term support to small meat producers and processors.

If they, which are the largest economy in the world, have these requirements, imagine in a country with as many inequalities as Brazil.