In addition to expensive inputs, frost increases potato farming costs and limits profitability

The magazine Hortifruti Brasil, a publication by Cepea (Center for Advanced Studies in Applied Economics), from Esalq/USP, brings this month the Batata 2021 Special. And the surveys carried out by the magazine's team for this special edition show a sharp increase in production costs of potatoes in 2021. In some cases, the increase exceeded 60% per bag produced.

According to researchers from the Hortifrúti/Cepea team, in addition to the increase in the cost of important inputs used in potato farming (such as fertilizers, agricultural machinery and implements, pesticides, among others), costs in 2021 were also driven by frosts recorded in July this year. This is because the climate phenomenon reduced crop productivity and required an intensification of cultural practices.

Of the five production cost structures evaluated for this month's edition, only the large-scale production one in Vargem Grande do Sul (SP) had a “looser” profit margin. In the south of Minas Gerais, on the other hand, the increase in costs was much higher than the average price received by the producer. And researchers from Hortifrúti/Cepea point out that, for the 2021/22 water harvest in this same region of Minas Gerais, everything indicates that, even with high potato sales prices, the producer will have difficulties in achieving a positive margin – for this, the values negotiation would need to be, at least, similar to those recorded in the last 2020/21 water harvest. For the producer who supplies the industry, the frosts in July intensified the losses, as the tuber's sales prices are pre-fixed in the contract.

Thus, in general, what was found is that, even with the highest sales prices in the 2021 winter harvest, rising costs limited the producer's profitability – and even left it negative, as seen in the South of Minas. Cepea researchers also indicate that this trend of increasing costs is advancing towards the summer harvest in this region of Minas Gerais, while the trajectory of negotiation prices is still uncertain. In this context, investments for 2022 may be harmed.

For the consumer, whose purchasing power is already weakened, the positive adjustments in potato prices end up being passed on little by little. And new limitations on field production would tend to keep tuber values ​​high, which, in turn, could result in weakening demand.