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April 9, 2020

Brazil's Ag Sector best Positioned to Weather Economic Turmoil

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The impact from the Covid-19 pandemic is going to be widespread and brutal, but the agricultural sector in Brazil should have the least impact of any sector in the Brazilian economy, especially the part of agriculture that focuses on exports. That is the view of the chief economists for the Federation of Agriculture and Livestock in Rio Grande do Sul (FARSUL) Antonio da Luz. He feels that agricultural exports will fare better than ever and that Brazil will emerge more than ever as the "go to" country for agricultural exports.

Brazilian agriculture is the sustaining sector of the Brazilian economy, but some sectors of the agricultural economy is going to be severely impacted. Agricultural products geared for domestic consumption will be negatively impacted the most due to recession, unemployment, and inflation. This will be especially problematic for perishable products such as fruits, vegetables, milk, etc. that must reach the market in a timely fashion. Agricultural products that are not food such as cotton and ethanol, will also be severely impacted.

The products that will emerge with the least damage will be grains that can be stored and exported around the world. That is already evident in Brazil as soybean and corn exports continue to set records. Domestic prices for soybeans and corn also are setting record highs due to the increased demand, but also due to a devalued Brazilian currency. Luz feels that in the future the consumers of the world will depend ever more on Brazilian agricultural production.

Luz indicated that the service sector will be impacted the most followed by the industrial sector and lastly agriculture. Food is the last thing consumers cut back on when they lose their job and income.