In 2020, agribusiness was one of the few sectors that continued to grow, despite the effects of the crisis on various segments of the industry. According to the 2020 Annual Macrosectoral Report, released by Costdrivers, a market intelligence platform that measures indicators and analyzes projections for decision makers in the purchasing and supply sectors, even before Covid-19 broke out, soybean and soybean prices corn prices were already accelerating due to international pricing.
The high volume of exports, mainly of soybeans and corn, continued to favor rising prices, aggravated by supply restrictions in South America. Sugar, another prominent component in national production, was the least affected in 2020, due to to the fall in oil prices. However, with the recovery of markets and the seasonality of the sector, prices began to grow again, despite having presented the lowest accumulated result of the year compared to soybeans and corn.
For 2021, the Costdrivers Macrosectoral Report predicts a more contained price accumulation for this year, with soybeans reaching a maximum of 17,88%, while corn remains at 21%. Sugar should show an increase of 10,18% by December/2021.
In 2020, the accumulated price of soybeans reached 74,19%, while that of corn reached 56,43%. Sugar was below 40%, ending December with an accumulated 38,16%. For Igor Garcia, economist at Costdrivers, the La Niña phenomenon has lost strength since the end of 2020, but its effects are still being felt, especially in the corn harvest, due to scarce rain, which could contribute to rising prices. The increase in exports is also another important factor supporting these transfers.
“Such expectations, however, are linked to the current tax situation. If the reform results in an increase in taxes on the sector, there is a risk that Brazil will lose competitiveness in exports, in addition to food prices rising even further, harming the end consumer,” says Garcia.
According to the Institute of Applied Economic Research (Ipea), Agribusiness GDP should grow 3,2% this year, and production should also increase. According to forecasts from the National Supply Company (Conab), corn production should increase by 9,1% and soybean production by 10,5%. If last year, Brazil experienced record harvests of soybeans, corn and cotton, as well as sugar cane, in 2021 harvests should also remain above average.
“In this scenario, we have supply and demand parity, which should contribute to lower prices. However, exports reduce the national stock, increasing prices for the domestic market and, consequently, for the end consumer, who is the point that feels this volatility the most,” highlights the economist.
If, on the one hand, exports cannot decrease, as they are essential to maintain the country's trade balance positive, on the other hand, cutting import tariffs is an effective way of trying to reduce these transfers.
The government's measure of zeroing taxes on imports of soybeans and corn by the end of the first quarter of this year helped keep values stable. However, with the return of tariffs and the flow of exports, the tendency is for consumers to continue to feel the weight of their basic food basket.
“The solution for a significant reduction in prices in the domestic market would necessarily involve reducing taxes, in addition to reducing public spending. It is urgent that economic and tax reforms consider not only producers and industries, but also the end consumer, who is the one who pays the bill,” concludes Garcia.