Food inflation is 57% in the Bolsonaro government

A period to be forgotten. Brazilian consumers almost three decades ago were not as punished by food inflation as in recent years.

During the period of Jair Bolsonaro’s government, food prices rose, on average, by 57%, a percentage well above the 30% of general inflation in the period. In some cases, the accumulated readjustments of food from the beginning of 2019 to the end of 2020 were close to 200%.

The data accumulated in the period are from the Sheetbased on information for 2022 released by Fipe (Fundação Instituto de Pesquisas Econômicas) this Thursday (5).

Worse, it was a period of rising unemployment, loss of consumer income and absence of readjustments in the minimum wage.

Food, including the basics, remained far from the purchasing power of a large part of the population. This brought the number of people struggling to feed themselves to 33 million.

The main price increases mainly affected food products that should be more accessible in the daily lives of the population. Onions, potatoes, beans, cornmeal and soy oil were among the main highs of the period.

From breakfast to other daily meals, the cost of food has always been on the rise, inhibiting the quantity of products on the table.

Low-income consumers, in addition to suffering a drop in purchasing power, had the highest readjustments.

Whoever went to the butcher shop to buy a kilo of chuck paid 94% more for the protein in the last four years. Who had income and opted for a kilo of picanha had readjustment of 52% in the period. The cornmeal rose 112%, and the egg, 78%.

The field has been affected by a perfect storm in recent years. Harvests were increasing, but external demand was so strong that it strongly influenced prices and internal supply.

A phenomenon already known to the producers, and which visited them from time to time, the climatic adversities, decided to attend more frequently. The result was historic breaks in soybean, corn, coffee, rice, bean and fruit and vegetable crops.

Geopolitical conflicts, such as those between Russia and Ukraine, two important suppliers of food to the world, have increased tensions and supply problems.

The outgoing government lacked special attention to products aimed mainly at the domestic market. It falls to the government to implement a policy of reversing these external pressures which, by prioritizing some products —such as soybeans and corn—, interferes with the production of other essential items internally.

The surge in domestic prices started with Chinese appetite. With the spread of African swine fever in that country in 2018, the Chinese, until then importers of soy from Brazil, also started to lead purchases of Brazilian proteins.

Chinese pork production, normally at 55 million tonnes a year, has fallen below 40 million. With that, China destabilized the world protein market. They chose Brazil as their main supplier, due to the potential of Brazilians. Domestic prices soared.

The pandemic brought new challenges to the field. There was no interruption in production, but logistics made the system more expensive. Bigger costs came from the conflict between Russia and Ukraine.

In addition to being a supplier of grains, the region is one of the main suppliers of inputs for agriculture. Fertilizer prices skyrocketed.

The pandemic forced changes in direction in some productive sectors, especially in fruit and vegetable and milk, two of the most affected in terms of supply.

There was a disinvestment by producers with less capital, which caused a reduction in supply and an acceleration in prices.

The dairy sector is one example. The drop in product supply made the price of long-life milk rise 26% just last year in supermarkets, according to Fipe.

The high dollar also changed international trade towards Brazilians, making imports more expensive and favoring exports. The country achieved record foreign sales in products that had never been imagined before.

Wheat exports totaled 3.1 million tons last year. There was an acceleration in foreign sales of rice as well. Even beans entered the export route.

Brazilian consumers, especially those with lower incomes, will have to live with a scenario of high prices for a long time. Food inflation already shows a slower pace of increase, but the level registered by food does not show signs of falling.

External demand remains high; international prices changed levels; and grain production, no matter how much producers try to increase volume, will increasingly depend on fickle weather.

Brazil had a loss of production in the last two years due to climatic adversities, the same occurring in the United States and Europe. There will probably always be the current country.

In this harvest, Argentines should harvest from 12 million to 14 million tons of wheat, a much lower volume than the 22.5 million in the previous season.

These production breaks, which become more and more constant, change the international scenario and require special supply programs on the part of governments. Brazil will have to program itself for this.