Commodities Shuttle: As agricultural prices rise and fall, inflation settles at a high level

The rotation of highs and lows of agricultural products in the countryside keeps, on average, high food prices and prevents a lower pressure of these items on the inflation rate.

The products with the greatest pressure a year ago, such as live cattle, soybeans, corn and rice, are showing small variations, or even falling, as is the case with the two cereals. Others, however, such as coffee, sugar and wheat, entered the pressure list.

In this balance of ups and downs, inflation has been settling at higher levels in recent months.

The foreign market continues to be the main source of domestic prices. Even with the appreciation of the real against the dollar, which would make exports less attractive, foreign prices maintain a very accelerated flow of income to Brazil.

According to data from Folha at the beginning of this month, confirmed by the Ministry of Agriculture on Thursday (14), the rise in prices in the foreign market allowed the country to obtain accumulated revenues of US$ 131 billion (R$ 612.3 billion) with the agribusiness in the last 12 months, a record for the period.

Although the country has exported a smaller volume of some products, the increase in foreign prices compensates for this reduction. Last month, foreign sales of soybeans fell 3.5%, compared to the same period last year. Revenues, however, rose 28%.

The price of soy is also supported by that of soy oil. In March, the volume of oil exported rose 83%, driven by the 53% rise in foreign values. The reduction in the supply of sunflower oil by Ukraine gave strength to other vegetable oils in the foreign market.

The arroba of fattened cattle lost the constant pressure it had had on the domestic market, maintaining, however, its price at a high level. The attractiveness of the foreign market made the exported volume rise 29% in the first quarter, compared to the same period in 2021. The average price per ton was US$ 5,769 (R$ 26.9 thousand) in March, 29% more than than in 2021, according to the Ministry of Agriculture.

At a high level in the domestic market, beef reflects the good moment of Brazilian exports. For the first time, Brazil has been the main supplier of beef to the United States, displacing Australia, Canada and New Zealand in this market.

With the good acceptance of the Brazilian product in the country, the sector will ask the Americans to increase the extra quota, in which Brazil participates, along with several other countries, or even request a specific quota and of greater volume for Brazilians.

If the foreign market drives the prices of beef and chicken, it does not do the same for pork. The international average value of this protein fell by 13%, due to lower purchases from China. As a result, Brazilian revenues from the product dropped 28%, influencing domestic prices.

External pressure in negotiations with wheat, coffee and sugar helps maintain internal values. Asia, Africa and the Middle East discovered the Brazilian cereal, while the smaller production of coffee keeps the current prices of the drink 83% higher than a year ago.

The IGP-10 (General Price Index), released this Monday (18) by the FGV, indicates a slowdown in the prices of agricultural products at wholesale. This month, the increase is 0.9%, a rate lower than the 3.62% in March, but still at a high level.

The inflation of these items already adds up to 9.9% wholesale this year alone. Among the main highs of the month, is that of fertilizers, which were 12.4% more expensive wholesale. This acceleration of costs for the producer will reflect in food prices.

As long as the foreign market is willing to pay the new prices for agricultural products, the domestic market will have to follow these values, due to Brazil’s importance in the world’s food supply.