Even with a forecast of good economic performance, Brazil still needs a solution to the high production costs in agriculture
By Tatyane Mendes 10/23/2022 7:30 am
Agricultural GDP expected to grow 10% in 2023
One of the main drivers of the Brazilian economy, agribusiness is an extremely relevant sector for the country. After the historic results of the last two years, the expectation is that the sector will continue to grow at a steady pace and remain competitive in the coming years. However, analysts point to challenges in terms of infrastructure and supply. For this year, the agro maintains good perspectives of contribution to the economy and to the Brazilian society, indicates Gislaine Balbinot, executive director of the Brazilian Association of Agribusiness (Abag). “Even though the sector's GDP fell in the first half of the year, due to higher production costs in agriculture and inputs in the agro-industry and the delay in harvesting in 2021, the CNA estimates that there may be a growth of 2.8% in GDP in this year. In exports, the high level of world prices is benefiting the sector. According to the Ministry of Agriculture, in September, exports totaled US$ 13.97 billion, a record value for the months of September. In addition to the increase in prices, which rose 17.2% in the comparison between September 2022 and September 2021, the amount exported grew 18.1%. From January to September 2022, Brazilian agribusiness exports totaled US$ 122.07 billion - an increase of 30.5% compared to the same period in 2021. According to Ipea, in 2023 a growth of more than 10 is expected. % for the Agricultural GDP”, he reveals.
Head of credit at Vectis Gestão, Mucio Mattos also considers that agribusiness is going through an excellent moment, and prospects remain positive. “Factors such as population growth, increasing urbanization and increased consumption of animal proteins continue to sustain the demand for world agricultural production. On the local side, the sector will also benefit from the increase in the offer of long-term credit with the advent of Fiagros, which, even in a short period of time, has already had excellent adherence and has more than 25 listed funds and R$4 .6 billion reais of equity”, he reveals. Fixed income analyst at Arton Advisors, Tarik Thome adds that there was a change in vision regarding the rural producer, which generated a professionalization of the sector and access to new forms of financing. “You already see companies that were considered small, family-owned, issuing Agribusiness Receivables Certificates (CRA). As a result, agribusiness should continue to grow more sustainably as its productivity increases. For the short term, we have a challenge in the macroeconomic scenario with the war between Ukraine and Russia and the tensions in China. In the long term, however, we still need to mature the sector, invest in infrastructure and technology. We have a bottleneck in logistics, which interferes with the cost of production”, he analyzes.
Challenges for the sector
Partner at DATAGRO, Carolina Troster says that, in order to remain competitive, the sector must invest more in research, technology and logistics. “Brazil is recognized worldwide for having a very competitive agricultural sector from the gates to the inside. But the poor conditions of the roads and a rail network of still modest size in relation to those of China and the USA are some of the challenges of the sector. The cost of transporting the agricultural product, from the farm to the port, is responsible for 20% to 30% of the increase in the final price for export. In other words, Brazil has to intensify investment in logistics to be able to keep up with the increase in production, which should be up to 30% over the next 10 years, as projected by MAPA. Finally, another problem worth mentioning is the storage infrastructure. On average, the Brazilian sector is able to store a maximum of 80% of production, while in the US this average is 150%, which requires the Brazilian producer to sell the product more frequently, putting pressure on the price of the product and raising demand for road freight. The future of agro is linked to the future of the energy transition in Brazil and in the world, with biofuels playing an important role in the decarbonization goals of the transport sector”, she points out.
Head of the Special Advisory for Economic Affairs at the Ministry of Economy, Rogério Boueri points out that Brazil will need to overcome some challenges such as the reduction of trade. “Brazilian agribusiness develops from trade relations with other countries and we have seen a series of taxes on imports of products abroad, in addition to problems of food insecurity that are beginning to close markets. We need to continue this trend of private finance and encourage free trade.