Signaling an increase for civil servants in an election year, a new change of president of Petrobras amid the increase in fuel prices and tax relief. The government of Jair Messias Bolsonaro is putting the economy chips on the table for reelection. A card with great potential in the game has not yet been revealed: the distribution of money to agribusiness.
It is a sector whose esteem is strategic for different reasons. Agriculture was responsible for moving BRL 55 billion in exports in 2021. This is practically 20% of all that Brazil exported in the period.
In addition, agribusiness is responsible for the occupation of 18.45 million people — the largest contingent since 2016, according to data from USP (University of São Paulo). The participation of agro in the Brazilian labor market reached 20.21%.
With the rise in fuel prices and the so-called fertilizer crisis, the cost of Brazilian agribusiness has increased exponentially. What is planted or even stocked has already been priced. But the next harvest is what worries the sector. And they want to know: how far will the government split the bill?
The answer will come in the next Safra Plan, which should only be presented in June. Since 2003, the federal government has earmarked funds for investment or funding for the production, industrialization and marketing of agricultural products. The plan goes into effect on July 1st and is valid until the end of June of the following year.
Until the final presentation of the plan for the 2022/2023 harvest, investors can expect a wave of “trial balloons” about the allocation of funds to the sector. But the proof of the nine will be in the plan to be presented.
Agro expects that the volume of credit and resources made available for rural insurance will increase as well as the equalization of interest for small and medium producers, as the representative of the Confederation of Agriculture and Livestock of Brazil (CNA) said in an interview. .
The increase in interest rates, which is an attempt to hold back inflation, makes the government itself more expensive to use credit for food production. The risk is falling into an old trap and increasing inflation by trying to fight it.
More expensive money in banks creates good opportunities to invest in fixed income via the issuance of corporate bonds.
The so-called CRAs (Agribusiness Receivables Certificates) are income securities backed by business receivables made by major agribusiness players. These papers have the advantage of being exempt from income tax.
On the stock exchange, the drafts of the next Safra Plan should move the stock prices of companies such as Três Tentos (TTEN3); Good Crop (SOJA3); Agricultural SLC (SLCE3); Brazil Agro (AGRO3); and Agrogalaxy (AGXY3).
All these assets rose shortly after the Russian invasion of Ukraine (with investors eyeing the reduction in the international supply of food), only to suffer declines in the following days (with the announcements of higher production). If we are effectively moving away from the “dollar standard” and moving towards the “commodity standard”, knowing how to differentiate the wheat from the chaff in relation to government aid to the agricultural sector will point to good opportunities for investments in the coming months.
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
