Commodities Shuttle: Next president will find agriculture in trouble

The next president will not find a situation as comfortable in agribusiness as in recent years.

Agricultural activity is expected to lose the accelerated pace it had been experiencing, mainly due to high costs and difficulties in obtaining inputs.

Producers’ profit margins are expected to be far from last year’s. In 2018 and 2019, periods of low inflation, nominal agricultural revenues were 19% and 4%, respectively. In 2020 they reached 48%, rising to 63% in 2021.

The numbers are from the MacroSector Consulting, whose director, Fábio Silveira, predicts a much lower level of revenue this year. This drop in liquidity will also impact crops in 2023.

Lower revenues in the countryside, a segment that has fueled the Brazilian economy, occurs exactly at a time when the global economy is undergoing a realignment, according to Silveira.

After a pandemic, which slowed economies and reduced the world supply of inputs and industrial components, comes a war, which will realign new trade alliances.

In this new world that is taking shape, the flow of oil is one of the main components at stake. And it is important for agriculture. In addition, the war affects traditional grain supply countries.

The excellent performance of the agricultural sector in 2021 is followed by a series of difficulties from now on.

They go through a break in the normal rhythm of oil supply, restriction in the supply and transport of fertilizers, difficulty in the supply of agrochemicals, high prices throughout the agricultural chain, in addition to other risks, evaluates Silveira.

The Brazilian economy, which had an industry on the tarmac and a service sector with little growth, but a vibrant agribusiness in recent years, may also see agriculture slip from now on.

The 2022/23 biennium will certainly be much more modest in agribusiness than it was in previous years. In addition to problems in the supply and prices of inputs, the sector will have difficulties in financing. Credit is getting expensive.

For Silveira, the big question is when and how the fertilizers will arrive for the start of planting of the 2022/23 crop.

With a very large weight in the cost of agricultural production, reaching close to 30%, depending on the product, fertilizers had already been rising in recent months, but now they will have an even greater impact after the invasion of Ukraine by Russia.

MacroSector has monitored the exchange ratio over the last 12 months and, in some cases, this ratio has been extremely unfavorable to the farmer.

In January 2021, with 12.2 bags of soybeans, producers purchased a ton of fertilizer with specific nutrients for this crop. In the same month this year, 26.6 bags were needed, 118% more, according to the consultancy.

With the exception of coffee, all major agricultural products lost in this ratio. Coffee had gains because commodity prices soared, due to frost and crop failure in Brazil, the main world producer.

In the case of sugarcane, there was also a deterioration in the exchange ratio, but with a lower percentage than for other products. One of the main weights in the cost of sugarcane, however, is diesel, which has been reflecting the rise in oil prices.

The most glaring example of the loss of relationship found by MacroSector was rice. In January last year, rice farmers delivered 15.9 bags of cereal for a ton of fertilizer. This year, there were 54.4, an increase of 242%.

Soy Agriconsult, when releasing the final figures for the 2021/22 harvest, estimated a production of 124.6 million tons, above Conab’s data, which are 122.8 million.

Explanations The consultancy predicts higher production because it estimates a smaller planting area for Rio Grande do Sul than expected by Conab.

Smash In this state, the break was big. As for Goiás, where productivity was record, Agriconsult foresees an area above the one predicted by Conab.

greater and lessr Soybean productivity in Rio Grande do Sul is only 25.4 bags per hectare. Goiás, on the other hand, reaches 66.3 bags.

safrinha The area of ​​the second corn crop should rise to 15.7 million hectares, with a potential of 92.2 million tons of grain, according to an estimate by Agriconsult.