Over the last years, the agribusiness has been in the spotlight in the economic debate and in important agendas in Brazil, with a wide repercussion in the media. This scenario is attributed to the ability to expand yield and production and to generate job opportunities in several regions, even in a delicate moment for Brazil’s economy: recession and persistent political and institutional crisis, which have been affecting both growth and development of the country.
In 2017, the Brazilian GDP increased 1%, according to IBGE, while the Agribusiness GDP volume, calculated by Cepea/CNA, upped 7.2%, boosted by the record production in the farming (agriculture + livestock) sector, the important agroindustrial recovery and the consequent spillover effect in the agro-services sector. Mainly regarding agriculture and livestock, Conab data indicates that, between 1990/91 and 2016/17 crops, the Brazilian production of grains rose 310%, for an average increase of 5.37% per year, hitting a historical record of 237.7 million tons last season.
Due to this good development, over the last decades, agribusiness contributed significantly to the Brazilian economy under different aspects, returning somehow to society the public investments directed to the sector. The sharp expansion of the Brazilian agribusiness production resulted in high availability of food, fiber and energy, guaranteeing the domestic supply and an increasing volume to export.
As for the domestic market, the increasing production at decreasing prices was a relevant aspect for price stability and inflation control, resulting in better income distribution and reduction of poverty in Brazil. Regarding the international market, exports of agribusiness have guaranteed foreign exchange and mitigated negative results in other sectors. According to data from the Ministry of Agriculture, Livestock and Supply (2018), exports of agribusiness represented 41% of the total shipped by Brazil between 1997 and 2017.
These positive data, which indicate the success of the Brazilian agribusiness, are also frequently interpreted as significant increase of financial gains of its players. However, the reality of agribusiness is complex, and inferences about the evolution of its real income require a deeper analysis.
The new methodology of the Agribusiness GDP developed by Cepea, which is been used since 2017, allows evaluating the agribusiness GDP increase under different views. Variations of the Agribusiness GDP income – which can be understood as the real revenue evolution of players in the agribusiness – are now decomposed in volume variations (Agribusiness GDP volume) and relative price variations (index that compares prices of the agribusiness with those in the rest of the Brazilian economy).
Concerning production, the analysis of data over the last 22 years (from 1996 to 2017) indicates that the Agribusiness GDP volume increased 49.4% (1.84% per year). On the other hand, agribusiness prices (deflator) dropped 36.2% compared to the Brazilian GDP deflator. It means that prices of the agribusiness production upped 2.02%, on average, less than the general average of the Brazilian inflation per year (measured by the national deflator) – indicating a devaluation of the production in the sector. In this scenario, even with the expansion of the production, with consecutive crop records and an increasing livestock production, the success of the agribusiness has not resulted, in the same proportion, in gains of real revenue for its agents. On the contrary, from 1996 to 2017, the Agribusiness GDP income decreased 4.7%.
This scenario is a result not only of prices of agribusiness products but also costs of its intermediary consumption (together, they determine the deflator evolution). The pressure of costs usually affects producers in the farming sector (agriculture + livestock), who usually face lower profit margin. Over the last years, prices of important products in the production (inputs) – such as fertilizers and pesticides (due to the dependency on imports) and diesel oil (affected by unstable public policies) – presented intense fluctuation.
In addition to this scenario, agribusiness now faces another important concern, related to the possible impact on the sector of new mandatory freight values, settled by the government due to the truckers’ strike in May. According to Cepea figures, based on IBGE Input-Output Matrices, the agribusiness is the most vulnerable sector of the Brazilian economy in relation to the possibility of increase and inefficiency of freight values, because it consumes roughly 42% of all transportation services in Brazil.
Therefore, interpretations that evaluate the revenue appropriated by agribusiness players as increasing are many times mistaken and different from the complex reality of the sector. Even more important is the fact that the influence of these distortions on the elaboration of public policies may mislead efforts and sectorial policies, with undesirable consequences for the sector, economy and society. The persistency of pressure on the revenue and increase of costs in the agribusiness may decrease investments and lead to a possible negative change of the supply of products and prices to end consumers. This fact would certainly affect the welfare of population, especially the poor, who allocates a major part of its income to food consumption.