Brazil Expects Growth in Tough Economic Times
Agribusiness contributes significantly to Brazil’s trade balance. The sector comprises 41% of the country’s exports, 23% of its GDP formation and generates 30% of all jobs in Brazil.
Production projections for many of Brazil’s most important agricultural crops in 2014 are very positive, with some categories expected to break records. In addition, there is potential for growth in the country’s soybean, livestock/dairy and coffee segments in the medium term.
However, this is set against a backdrop of tough economic conditions. GDP grew just 2.3% in 2013, but one positive is the weakening of the BRL/USD exchange rate – which may help to offset the impact of lower export prices. While some growth is anticipated from exports, some experts and banks argue that Brazil’s competitiveness as an exporter has been hit by rising costs in the services and logistics areas.
Brazil is edging closer to becoming the largest food producer in the world, as it expects to harvest approximately 193.6 million tons of grain this season.
Moderate drought conditions affected Brazil’s soybean producing regions in late 2013, before conditions improved in January, 2014. As a result, yield reductions of up to 15% are expected across 30% of the region’s crops. In 2014, the country’s soybean production area is expected to increase by 7%, to 2 million hectares. An anticipated harvest of 90 million tons in 2014 would make Brazil the world’s largest soybean producer.
With global supply predicted to exceed demand in 2013/14, Brazil’s corn production is expected to drop significantly – down 11% to 72 million tons – a pragmatic decision by the country’s growers.
SUGAR AND ETHANOL
Contrasting fortunes are expected between these two staple crops. Sugar has been in surplus for three years and this is not expected to change for 2013/14. However, ethanol should see a small price increase as a result of increases in Brazil’s gasoline price, and the country’s growing fleet of biofuel vehicles.
After breaking records in 2013, Brazil expects this market to continue to grow in 2014. Driven by robust demand in regions such as Asia and emerging markets in Thailand, Myanmar and Cambodia, Brazil has also benefited from reduced supplies from Australia and the USA. In the meantime, negotiations are underway to increase access to the Chinese, US and Saudi Arabian markets.
Falling grain costs and tight competition in other meat markets, such as beef, make for a positive outlook for poultry producers. Globally, this market is expected to grow by up to 2%, suggesting that price increases, or reductions, will depend on the aggregate growth of supplies from major exporters. In recognition of this situation, Brazil’s poultry sector has announced modest ambitions for growth in export volumes in 2014.
GROWING GROSS VALUE OF PRODUCTION
A recent survey, from the Strategic Management Advisory Board of the Ministry of Agriculture, Livestock and Food Supply (AGE/Mapa) predicts that as crop production grows, the gross value of production (GVP) will increase to the highest ever achieved in the country, R$ 314.8 billion. This would be a 10% increase over 2013 and the first time GVP surpasses the R$ 300 billion mark in Brazil. The combined GVP of crop production and livestock breeding is expected to reach R$ 462.4 billion, up 7.5% on 2013.
SGS SUPPORTS BRAZIL’S GLOBAL SUPPLY CHAIN
As an experienced third party certification, inspection and verification company, SGS offers end-to-end supply chain services that reduce risk, ensure quality and improve productivity. We help ensure the integrity of the food chain by managing crops, enhancing seed development, conducting soil testing and harvesting, moving products through the global supply chain, and managing trade inspection at export and import.
In addition, we can assist your company to continuously improve the culture of safety, quality and sustainable development.
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Agricultural Manager Brazil
SGS do Brasil Ltda
Avenida Andromeda, 832 - 6° andar
CEP 06473-000 – Barueri/ SP