July 2, 2020

Brazil's Agricultural Gross Domestic Product Hits New Record

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

Agriculture encompasses over 20% of Brazil's Grosso Domestic Product (GDP) when considering crop and livestock production, agroindustry, processed foods and beverages, forestry products, and agricultural services. While the Gross Domestic Product of Brazil is expected to decline approximately 6-7% in 2020 due to the Covid-19 pandemic, the agricultural sector in Brazil is projected to do just the opposite in 2020.

The value of Brazil's Agricultural Gross Domestic Product (VBP) is expected to increase 12.4% in 2020 according to estimates from the Agricultural and Livestock Confederation of Brazil (CNA). The value of Brazil's crops is expected to increase 15.5% in 2020 to R$ 467.7 billion and the value of Brazil's livestock is expected to increase 7.5% to R$ 272.6 billion.

The increase in income from crops can be attributed to record high domestic commodity prices driven by the devaluation of the Brazilian currency in relation to the U.S. dollar as well as strong demand from China in response to the trade dispute between China and the United States.

Good results from crops are a reflection of higher prices and higher production for soybeans (+4.7% and +11.7% respectively), rice (+6.5% and +16.2%), coffee (+30% and + 20.4%), and the higher price for corn, which is up 28.3% and the higher production of oranges, which is up 4.2%. Income from livestock operations are also higher with hogs up 10.4%, beef up 19.5%, and eggs up 24.6%. The higher income is also a reflection of increased production and higher prices.

The Brazilian Ministry of Agriculture and Conab are not quite as optimistic about the growth of Brazil's agricultural VBP, but the trend is the same. They are estimating that the Brazilian agricultural VBP will increase 8.5% in 2020 with the value of Brazilian crops increasing 11% and the value of Brazilian livestock increasing 3.9%. The difference between the two estimates is due to what is all included and their projections for future prices of Brazil agricultural products.

The bottom line for both estimates is the same - the Brazilian agricultural sector has weathered the Covid-19 pandemic in flying colors. If you want to read an excellent summary of the situation in Brazil, Google the report named: Brazilian Agricultural Sector Thrives Despite Covid-19 Pandemic from the USDA Foreign Agricultural Service Report Number: BR2020-0025. It is very informative and highly recommended.

Below are two graphs of Brazil's Agricultural Gross Domestic Product - VBP. Both graphs are from CNA and are adjusted for inflation. The source of the data is the Brazilian Ministry of Agriculture. The first graph is the value of the VBP in billion Brazilian reals. The second graph is the value of corn or milho (blue line) and the value of soybeans or soja (red line) also in billion Brazilian reals.

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