Brazil’s big agro revenue to stall in 2019

. Apr 04, 2019
Brazil's big agro revenue to stall in 2019

According to projections, Brazil’s big agro will experience a nominal growth in revenue of only 1.5 percent compared to last year, bringing in a total of BRL 393.8 billion (USD 102 billion). This performance will largely be sustained by increased revenue of the following crops:

  • Corn. Producers are expected to raise roughly BRL 60 billion. In recent months, prices have gone up despite a harvest projected to be 10 percent larger.
    </span></li> <li style="font-weight: 400;"><b>Orange.</b><span style="font-weight: 400;"> Forecast revenue is at BRL 32.8 billion, a 21-percent jump from last year. While Brazil remains the world&#8217;s largest orange exporter, that performance is mainly due to a 28.5-percent price hike for the fruit on the Brazilian market—compensating for an 11-percent drop in exports between July 2018 and February 2019.</span></li> <li style="font-weight: 400;"><b>Beans.</b><span style="font-weight: 400;"> Droughts in several Brazilian regions have damaged producers and pushed prices up. In the South, for example, pinto beans has gotten 110 percent more expensive; black bean prices are up 41 percent. Overall, inflation on the product should be nearly 56 percent, pushing the sector&#8217;s revenue to BRL 7.2 billion.</span></li> </ul> <p><span style="font-weight: 400;">On the other hand, some traditional crops will experience a decline in revenue, especially:</span></p> <ul> <li><b>Soybeans. </b><span style="font-weight: 400;">Brazilian soybean <a href="">production</a> will be 3.8 percent lower this year than in 2018, and domestic prices are set to go down by 2.8 percent. The sector&#8217;s revenue should fall 6.5 percent this year, to BRL 154.4 billion. Producers are reportedly afraid of the possible consequences brought by an end to the U.S.-China trade war. In the Center-West, many producers are <a href="">afraid of losing ground</a> to U.S. farmers.</span></li> <li><b><b>Coffee.<span style="font-weight: 400;"> The 2019/2020 harvest is expected to be 10.8 percent smaller—coming in at around 3.2 million tons. The production of arabica beans should be down 15 percent this year, following a record-breaking year in 2018. Revenue should follow this trend, finishing 2019 down 11.8 percent from last year, at BRL 18 billion.</span></b></b></li> </ul> <hr /> <h2><strong><img loading="lazy" class="alignnone size-large wp-image-15416" src="" alt="Brazil's big agro revenue to stall in 2019" width="1024" height="683" srcset=" 1024w, 300w, 768w, 610w, 1200w" sizes="(max-width: 1024px) 100vw, 1024px" /></strong></h2> <hr /> <h2><strong>Impacts on the economy</strong></h2> <p><span style="font-weight: 400;">In Brazil, agricultural production alone accounts for only 5 percent of the Brazilian economy. What we usually call &#8220;big agro&#8221; is the chain involving other segments of services and industries. That&#8217;s what makes big agro so strong in Brazil, in turn accounting for 23 percent of the country&#8217;s GDP and giving producers enormous lobbying power.</span></p> <p><span style="font-weight: 400;">This means that when the sector flatlines—with a mere 1.5-percent growth in revenue—the entire Brazilian economy feels the effects. It goes in line with growth forecasts which continue to be updated and becoming more and more pessimistic.</span></p> <p><span style="font-weight: 400;">According to the latest Focus Report—a weekly survey conducted by Brazil&#8217;s Central Bank with top-rated investment firms—investors have reduced their GDP growth expectations for Brazil to 1.98 percent this year. </span></p> <p><span style="font-weight: 400;">In January, the forecast was 2.53 percent.</span></p> <hr /> <p><img loading="lazy" class="alignnone size-large wp-image-15415" src="" alt="Brazil's big agro revenue to stall in 2019" width="1024" height="683" srcset=" 1024w, 300w, 768w, 610w, 1200w" sizes="(max-width: 1024px) 100vw, 1024px" /><span style="font-weight: 400;">

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Fabio Silveira

Fabio Silveira is an economist, managing partner at MacroSector Consultores.

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