November 28, 2011

Agricultural Investments Resume Upward Trend in Parana

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

The agriculture sector in the state of Parana represents one third of the economy of the state. The poultry industry alone employs 550,000 people in the state, or 5% of the population. After a brief slowdown in 2009 due to the worldwide financial crisis, investments in agriculture are once again increasing in the state especially in sugar and ethanol production, meat and food production, and beverages.

According to the Center for Applied Advance Economic Studies (Cepea), from the year 2004 to 2010, the gross domestic product for the Brazilian agricultural sector increased at an annual rate of 2%. The rate would have been higher were not for the reduction of 5% in 2009 due to the economic crisis. In 2010, it increased 4.7%, which was the largest increase since 2007. In the first half of 2011it fell back to 3.3% due to the disappointing sugarcane harvest.

The state of Parana is one of the primary agricultural states in Brazil and the agricultural sector continues to expand in the state. Meat exports from the state (poultry, pork, and beef) now top one million tons per year. The state is also a leader in the number of agricultural cooperatives which account for 42% of the agricultural activity in the state.

The state of Parana really started to become an agricultural powerhouse starting the decade of the 1970s. In 1975 the National Alcohol Program was launched in Brazil which jumpstarted the production of fuel alcohol in Brazil. That decade also saw the start of soybean production in the state and the soybean processing industry. Prior to that, the state of Rio Grande do Sul was the largest soybean producing state in Brazil, but it was quickly surpassed by Parana, which in turn has now been surpassed by Mato Grosso.

In the 1980's more emphasis was placed on increasing the production of the raw commodities such as soybeans and corn. In the 1990's livestock production increased tremendously as a way to add value to the commodities. The poultry and swine processors invested heavily in upgrading their facilities to meet international standards and as a result, meat exports have grown tremendously over the last decade.

The agricultural expansion in the state could have grown even more were it not for the infrastructure limitations that are common throughout Brazil. The main port in the state, the Port of Paranagua, has not been able to keep up with the increasing demand for exports and as a result, it continues to be plagued by bottlenecks and high operating costs.