Commodities Shuttle: High agricultural prices, fueled by the war, reaches Brazilian products

Domestic prices of agricultural products, which had already been on an upward climb for the past two years, took a new pace of rise after Russia’s invasion of Ukraine.

The domestic market is responding more quickly to external pressure from the most important products in the two countries involved in the conflict. Among them are wheat, corn and vegetable oil.

The new price increases will bring more pressure to the consumer’s pocket, which is already living with significant increases in several items of daily consumption.

Lucilio Alves, a researcher at Cepea (Center for Advanced Studies in Applied Economics), says that, in some cases, these increases will be incorporated little by little in the country, but will reach the consumer.

Wheat is one of them. A ton of cereal already reaches R$ 1,760 in the domestic market. In Argentina, the value rose to a historic level of US$ 495 per ton.

The internal prices of derivatives still reflect the values ​​of old contracts, says the researcher. The new contracts will bring more heated prices, which will reach the consumer after going through adjustments within the wheat chain itself.

These new prices, determined by the foreign market, may, however, cause a change in domestic production.

In Alves’ assessment, the rising value of wheat will encourage more producers to switch from “non-commercial” plantations — land cover in the winter period — to wheat.

If this occurs, the country may record another cereal production record. Everything will depend, however, on the disposition of seed and fertilizer.

Wheat has been trading at the maximum levels allowed on the Chicago Stock Exchange. On Monday, the first contract ended the day at US$ 12.94, repeating the 7% increase it has been registering daily.

Soybeans were not much affected, for now, in this period of war. The product goes through a seesaw in the international market, with ups and downs, albeit at high price levels.

Internally, the bag is being negotiated at R$ 204 in Paranaguá. The demand for soybean oil, however, may force the rise of this oilseed.

A ton of soy oil is being sold at a record level of R$ 9,537, with an accumulated increase of 171% in the last two years in Brazil.

Oil rises because Ukraine, a major supplier of sunflower oil, is blocked. Argentina, the world’s largest exporter of soybean oil, had a crop failure. Indonesia, an important supplier of palm oil, had a reduction in production.

As a result, the demand for the North American and Brazilian product increased. Brazil, due to drought, has reduced harvest. Brazilian soy production, with a potential of 145 million tons, is expected to remain at just 122.8 million, according to estimates released by AgRural this Monday (7th).

Alves says that the uncertainties in the price of oil also help to keep the market for soy oil, an important component in the production of biodiesel, warm.

The price of corn also reacts in Brazil, taking the path of R$ 100 per bag again. The difficult access of Ukrainian corn to the international market and the uncertainties with planting in that country, which will start in a few weeks, raise cereal prices on the Chicago Stock Exchange.

The May contract came to be traded at US$ 7.80 a bushel (25.4 kg) on ​​Monday.

Although it still does not register the effect of Russia’s war against Ukraine, the FAO (Food and Agriculture Organization of the United Nations) is already showing record prices for food, which should keep the inflation rate high around the world.

February prices were 24% higher than a year ago. In comparison with January, the average increase in food was 3.9%, influenced by vegetable oils, which rose 8.5%, and corn, which was 5.1% more expensive. Wheat had an increase of 2.1%.

Meat increased, on average, 1.1%, but beef recorded record prices, due to increased global demand and restricted supply of cattle in Brazil, according to the FAO survey. In the last 12 months, the elevation of this protein was 15%.