How climate issues are pushing food prices up in Brazil

. Jul 07, 2019
How the climate is raising food prices in Brazil

President Jair Bolsonaro can be called many things, but not green. He has voiced his displeasure at environmental inspectors, saying that, on his watch, environmental authorities wouldn’t continue their “abusive” crackdown on rural producers. But deforestation and climate change are set to have a particularly harsh effect on Brazilian agriculture in the near future—and temperatures are set rise sharply within the next few years.

Moreover, climate change has a considerable influence on food prices, as shown by a Brazilian Central Bank study.

</span></p> <p><span style="font-weight: 400;">The El Niño weather phenomenon has been interfering with food inflation in the country—for better and for worse. El Niño is the name for an unusual warming of the Pacific Ocean surface, leading to stronger droughts in Brazil&#8217;s Northeast, heavier rains in the South and warmer temperatures in the Southeast and Center-West. Brazil is feeling the interference of this phenomenon since the spring of 2018 and, according to the Brazilian National Institute of Meteorology (Inmet), this climate pattern will continue until spring 2019, but so far it has been mild.</span></p> <p><span style="font-weight: 400;">Through a mathematical model, economists calculated the impacts of El Niño on food inflation and found out that “the climate factor has contributed to deviate food inflation in comparison to historical standards over the past years.”</span></p> <p><span style="font-weight: 400;">In the first three months of 2019, food inflation has risen 4.34 percent, above the average variation for the period in the past two decades. Experts calculate that 1.5 percentage points of that increase are related to an excess of rain. Considering El Niño, especially, economists believe it had a more positive impact, </span><a href=""><span style="font-weight: 400;">unlike the 2015/2016 season</span></a><span style="font-weight: 400;"> when it caused severe drought in northeastern, northern and central areas of Brazil, as well as flooding in the South.</span></p> <p><img class="alignnone size-full wp-image-20295" src="" alt="climate change warmer summer brazil food prices" width="1070" height="1495" srcset=" 1070w, 215w, 768w, 733w, 610w" sizes="(max-width: 1070px) 100vw, 1070px" /></p> <h2>What to expect this winter?</h2> <p><span style="font-weight: 400;">The winter in Brazil is typically the driest season in most of the country. However, in past years,</span><a href=""><span style="font-weight: 400;"> droughts have become more intense and widespread</span></a><span style="font-weight: 400;"> in pivotal areas such as the Center-West, Brazil’s major soy belt.</span></p> <p><a href=";page=notas_tecnicas"><span style="font-weight: 400;">According to Inmet</span></a><span style="font-weight: 400;">, the forecasts for winter point to a slightly below average or average rainfall, coupled with hotter temperatures, mostly in August and September, “creating conditions for wildfires.”</span></p> <p><span style="font-weight: 400;">According to Ana Luiza Lodi, a market intelligence specialist at consultancy INTL FCStone, a drier season is a positive outcome for corn, as it helps the harvest to progress and produces drier grains, which is important for storage. When it comes to soy, however, the scenario is different.</span></p> <p><span style="font-weight: 400;">During the winter, the state of Mato Grosso, </span><a href=""><span style="font-weight: 400;">Brazil’s biggest soy producer</span></a><span style="font-weight: 400;">, prohibits sowing in order to preserve the land. The sowing process begins in mid-September and that’s when El Niño’s influence may be detrimental, Ms. Lodi explains.</span></p> <p><span style="font-weight: 400;">“There may be a delay to normalize the rains in spring. Depending on the rain pattern, the sowing may be delayed, but it is too soon to say that,” she told </span><b>The Brazilian Report</b><span style="font-weight: 400;">.  </span><span style="font-weight: 400;"><br /> </span><span style="font-weight: 400;">INTL FCstone doesn’t have an estimate for Brazilian soy harvest in the 2019–2020 season just yet. Regarding the 2018–2019 season, the National Supply Company (Conab) estimates that Brazil has produced 114.8 million tonnes of soy and </span><a href=""><span style="font-weight: 400;">238.9 million tons of grains</span></a><span style="font-weight: 400;">, in total. </span></p> <p><span style="font-weight: 400;">Another area that may be influenced by El Niño is the Brazilian South. Inmet believes that rains will be above average in most of the region, and while temperatures may oscillate due to cold fronts, they will tend to be higher than average. As we’ve seen in the past, too much rain in the area may be detrimental to crops, especially wheat, highlights Ms. Lodi.

Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Most recently, she worked as an Editor for Trading News, the information division from the TradersClub investor community.

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