Preserving margins: a great challenge in 2022

Following a “tragic” year for Brazilian agriculture, when some crops like coffee, sugarcane, orange and maize faced hard harvest losses, according to former Brazilian Agriculture Minister, Roberto Rodrigues, 2022 is bound for better results for farmers about these issues. Thus, it is necessary to preserve margins.

Nonetheless, do farmers tend to see their margins getting narrower due to rise of costs, mainly of ag inputs.

Preserving margins

The evaluation was conducted during a live in December 2021, streamed by Valor Econômico news agency, along with Globo Rural Magazine.  The article has been released by BeefPoint.

“In 2021, agribusiness faced quite hard times. I’d say there were two dramatic moments: the first one caused by the weather, and the other one was financial”, stated Rodrigues. He is coordinator of the Center of Agribusinesses at Fundação Getúlio Vargas (FGV).

In 2021 Brazil faced its worst drought in more than 90 years, which severely “chastised” production at Brazil’s Center-South region. 

Agricultural Commodities

From an economic perspective, Rodrigues also highlighted the strong surge in prices of agricultural commodities. International quotations have reached peaks of over 50% upwards, which helped farmers to make good deals, with margins above average. Such condition is not supposed to occur in the same intensity in 2022.

“Despite costs have taken off, there might be broken records ahead. 2022 tends to be positive, with lower margins though. A record harvest in Brazil may help pressing the prices of agricultural commodities upwards. But those who anticipated and have already locked positions (sell) will end up making good profit. The margin will be lower, but without difficulties”, said Rodrigues. 

From the costs perspective, the major concern may be on the second harvest 2021/22 and the cycle 2022/23. Assuming that there is still a lot of uncertainty, specially over supply and costs of ag inputs. 

Economic sanctions against Belarus, one of the main global suppliers of potassium, and the crisis in energy supply in China, which also affects the offer of fertilizers and ag defensives, might be important setbacks during the year. 

“There had been a concern about fertilizers not coming in due time or at adequate costs. For the next year, I do believe problems might be not so grave. There’s also an expectation to reduce fertilization, which would be reasonable for more mature areas. For ag defensives, the situation may be slightly worse”, projected the form Minister. 

Auxílio Brasil and the image abroad

Rodrigues also commented that Auxílio Brasil (a government aid given to socially vulnerable people) may push an increase in domestic consumption of food, as it did with the Emergency Aid by the beginning of the pandemic. 

The former Minister also calls attention over communication of environmental issues.  He believes international pressure will be higher in 2022.

A minority of outlaw farmers spoil the image of the entire sector, so it is up to the producers themselves to reinforce their disgust for environmental crimes. 

The live stream of Valor Econômico is also available on YouTube.