Ipea analyzes rise in agricultural prices in Brazil and on the international market

The Institute for Applied Economic Research (Ipea) released, this Thursday (19/8), the quarterly analysis on prices and agricultural markets, with monitoring of domestic and international prices until July 2021 and balance of supply and demand for the main products of the sector for the 2020-2021 harvest. To the commodities most representative in the Brazilian export basket - grains, meat and coffee - continued with strong international demand in the first half of 2021, and with higher prices compared to the same period in 2020. The edition continues with the participation of the Center for Advanced Studies in Applied Economics (Cepea/Esalq/USP) for the analysis of domestic prices, and the National Supply Company (Conab) for the analysis of production and domestic supply and demand balances.

The document pointed out an increase in the domestic price (in reais) of all accompanied products, with the exception of potatoes, in the comparison between the first half of this year and 2020: soybeans (78%), corn (77%), wheat (40% ), cotton (75%) and rice (55%).

In relation to international prices (in dollars), when analyzing the first half of 2021 and 2020, only rice showed a drop of 11%. The other products showed an increase: soybeans (65,9%), corn (72,3%), wheat (24,4%), cotton (38,1%), beef cattle (18,3%), lean pork ( 65,3%), chicken meat (24,2%). "The increase observed in grains should impact livestock production costs, which could negatively influence the supply of these commodities and animal proteins in the country", considered the associate researcher at Ipea, Ana Cecília Kreter.

"The rises in agricultural prices in Brazil resulted from a combination of factors such as the hydrological crisis, significant increases in international prices and exchange rate devaluation", said the director of Macroeconomic Studies and Policies at Ipea, José Ronaldo Castro de Souza Júnior, one of the note authors.

The prices of the main Brazilian agribusiness product, soybeans, continued to rise in the country, driven by the appreciation of export premiums and the maintenance of high external demand for the product. The confirmation of the soybean harvest failure in Argentina and the low Brazilian and North American stocks increased the price by 1,9% in the second quarter of this year compared to the previous quarter. There is an expectation that exports of grain and derivatives, mainly bran, will continue, given the restricted supply in Argentina.

The price of corn closed the second quarter of 2021 with an increase of 11,9% compared to the first quarter of this year, driven by low stocks and the commitment of part of the crops, whose productivity was affected by climate issues. Domestic consumption in the 2020-2021 harvest should be impacted by the expected drop in supply due to the drop in corn production and productivity. Consumption was revised downwards by Conab, but it should be 3,3% higher compared to the previous harvest, a scenario that not only limits cereal exports, but is also one of those responsible for the increase in corn prices in Brazil. Cepea indicates that there is greater remuneration for domestic sales compared to exports of the product.

Arabica coffee, the most produced species in the country, ended the second quarter of 2021 with a 17,5% increase in prices compared to the previous quarter, driven by the estimated drop in the 2021-2022 Brazilian harvest. According to Cepea, domestic product prices are expected to fluctuate at high levels for the remainder of the year. In the international market, the demand for coffee at home more than compensated for the reduction in consumption outside the home caused by the pandemic. For the second half of the year, prices are expected to remain at levels higher than those of 2020, reflecting increased demand and the opening of bars and cafes.

Regarding meat, there is a movement towards substitution of animal proteins, partly for health reasons and partly due to the search for cheaper proteins. Between the first and second quarter of 2021, there was an increase in the price of proteins: fatty beef (4,9%), pork (2,9%) and chicken meat (10,9%). Live cattle prices are expected to remain at high levels until the end of the year, depending on the behavior of domestic demand. In the case of pigs, the low availability of corn - an important pig farming input that directly affects the cost of animal feed - should contribute to the rise in prices for both live pigs and meat in the third quarter of 2021. In the case of chicken meat, the return of face-to-face classes in much of the country should contribute to an increase in demand, due to the composition of school meals. There is a prospect of an increase in the price of wholesale slaughtered chicken in the third quarter of this year.

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