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Brazil Economic and Agriculture
Outlook reveals that Brazilian agriculture has moved
to the forefront of the global export scene becoming a major
supplier to the global market. Brazil's land mass along with its
acceptance of GMO crop technologies has allowed the country to
compete with other major exporting nations in the corn and soy
markets.
Brazil's soybean exports have increased by 230% over a ten-year
period. During that same timeframe, US soybean exports went from 41
million tonnes to 45 million tonnes, an increase of 10%. For Brazil
that represents its share of the world soybean exports rising to
57%.
Governmental policy in general has been supportive to the
agriculture sector along with intense regional backing and a
domestic currency that has recently spurred record local prices
which will continue to support further expansion. This is in
contrast with the United States whose producers are struggling with
prices at 10-year lows. For example, ethanol production and
consumption has been a part of the Brazilian culture for many
decades and as second crop corn production becomes a larger profit
center for the Brazilian farmer, the domestic corn ethanol industry
is beginning to expand. The RenovaBio program will create a large
domestic demand level for biodiesel and subsequently
vegetable/animal fat as a feedstock.
Brazil has also entered the global protein market as a major
supplier of pork, poultry, and beef. Brazilian producers will be
under continued global scrutiny surrounding the environmental
impacts of pulling land into production moving forward.
The transportation sector has made many inroads towards lowering
logistic costs for producers helping to increase margins and
further improvement is expected. Trucking rates across Brazil, for
the transportation of soybean exports, have been trending lower
since spring 2018. Global agriculture companies have added port
capacity increasing the ability for new monthly export records.
Presently, these initiatives have returned costs to some of the
lowest levels seen across the past five years.
The Brazilian economy struggled with a plunging Gross Domestic
Product (GDP) following the outbreak of COVID-19 but in 2021, the
government is expected to start its return to fiscal prudence and
relaunch the privatization agenda, keeping public debt manageable.
Given this, we do not expect that rating agencies will downgrade
Brazil's sovereign rating and as result, the economy is seen as
growing 3.8% in 2021 after plunging 6.4% in 2020.
IHS Markit estimates the deficit of the overall public
sector for 2020 at above 15% of GDP. This should shrink to around
5% by 2024 as we are assuming the government will return to fiscal
prudence in 2021 while passing a tax reform. In addition to the
reduced policy rate, the Central Bank of Brazil has sizable
ammunition to continue to provide liquidity and incentivize
credit.
Brazil will face many challenges in the years ahead as the
federal government is expected to struggle with new infrastructure
projects due to a lack of foreign investors and rigid
pre-requisites defined by federal government entities. Inability of
federal government to suppress deforestation in the Amazon region
will impact foreign investment opportunities. The livestock
industry will need to plan for potential outbreaks of Foot and
Mouth Disease, African Swine Fever and avian flu impacting Brazil's
growing meat protein export business.
However, Brazilian producers will see increased yields and
productivity derived from higher adoption rates for new
technologies, which will foster growth and investment opportunities
not only in crops but animal nutrition technologies as well. This
not only includes seed genetics but also water management projects
in the arid region of the Northeast focused on high value
exportable products and supported by efficient irrigation equipment
and managerial software.
The Bolsanaro government could create lending programs for
farmers linked to environmental and sustainable farming practices
to spur international investment. Although caloric meat demand is
reaching peak levels in developing nations, beef and pork
consumption is rising both in the Americas and Asia, along with
cheap poultry prices supporting the market growth in all
regions.
5 KEY QUESTIONS THIS REPORT WILL ANSWER ON
BRAZIL
What is the size of the market and growth opportunity ?
What's the macro and political situation and how does it impact
the agribusiness sector ?
What are the key commodities and their planted areas, production
and yields ?
What are the trends and drivers in the livestock segment ?
How does Brazil perform against other countries ?
Contents:
Chapter 1: Introduction
Chapter 2: Macroeconomic status and trends includes a near-term
outlook.
Chapter 3: Political scenario - covers Government stability,
policy direction and predictability, and Opposition prospects and
program
