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Rice and wheat: considerations on agricultural and industrial values

To increase the supply of basic foods for Brazilians – rice and wheat – in an economically sustainable way is a serious challenge. Currently, both crops, one in summer and the other in winter, occupy roughly four million hectares in Brazil. In 2005, they occupied circa six million hectares. Rice and wheat are substitutes for consumption in several segments as well as in times when the income of the population decreases.  


While production and the value of agricultural production oscillate, depending on investments of producers, regarding genetic improvement, weather conditions, prices and other aspects, the industrial segment, especially wheat, is apparently having results that are more satisfactory. The question is: how to keep sustainability of the production chain as a whole?


As for the rice market, the highest Brazilian supply in all series was registered in 2010/11, according to Conab (National Company for Food Supply). The second highest, in turn, was observed in 2004/05. The 2016/17 supply was 10.4% smaller compared to that in 2004/05, pressed down by the significant area reduction by 50%. The situation is not worse because productivity increased more than 80% in the period. The area decreased in practically all Brazilian regions, except in the South.


According to data from IBGE (Brazilian Institute of Geography and Statistics), the value of the rice agricultural production changed from 9.7 billion BRL in 2005 to 9.9 billion BRL in 2014 – most recent data available (values were deflated using IGP-DI, 2016 basis = 1.00). Meanwhile, considering the industry of rice processing and manufacturing rice products (according to Cnae – National Classification of Economic Activities code 1061), the value of rice industrial products went from 8.3 billion BRL in 2005 to 12.2 billion BRL in 2014. Therefore, while the value of the agricultural production rose only 1.6%, whereas the value of the industrial production soared 46.4%. In this period, the domestic consumption decreased. It was necessary to find new markets to export. Besides, the release of new rice types, including wholegrain parboiled rice and semi-ready versions with seasoning, favored income generation in the industrial sector; however, the revenue margin has not necessarily been improved. In the period of ten years (2005 – 2014) in this analysis, the value of the industrial production was 14.3%, on average, higher than the value of the agricultural production.


Considering IBGE data, when separating Cnae 1061, between 2005 and 2014, the following increases for the production value are highlighted: a) rice-based food or rice flakes – obtained by expansion, roasting, pre-cooking etc. (321.5% increase in the period); b) wholegrain rice (263.5% up) and c) services related to rice processing (147.5% higher).


As for the wheat sector, agricultural production averaged 5.1 million tons between 2005 and 2016, but it rose from 2.2 million (2006) to 6.7 million tons (2016). In the same period, the average yield was 2.3 tons per hectare, moving from 1.27 ton per hectare (2006) to 3.17 tons per hectare (2016). The area was close to 2.2 million hectares, with the smallest observed in 2005 (1.76 million hectares) and the highest in 2014 (2.76 million hectares). Differences between maximum and minimum areas, as well as between productivity and production, also indicate the risks involved in the activity, pointing to the need to define public policies to underpin production.


The Brazilian wheat supply accounts for less than half of the domestic consumption, which justifies differences between agricultural and industrial production values. From 2005 to 2014, IBGE data indicate that the value of the agricultural production averaged 3.4 billion BRL, ranging from 1.9 billion BRL (2006) to 4.7 billion BRL (2013) – deflated to 2016, using IGP-DI. On the other hand, the value of the industrial production averaged 13.04 billion BRL in the same period (in 2014). On average, the value of the industrial production was 281% higher than the value for agricultural production.


The industrial wheat sector has also attempted to add value to byproducts. Analyses of  Cnae 1062 groups of products show an increase of the value of production from 2005 to 2014 for: a) “wheat-based products or wheat flakes (obtained by expansion, roasting, pre-cooking etc.), including wheat for kibbeh” (210% up); b) “powder mix for dough for cake and pies, etc.” (127%); c) “wheat milling services and other services related” (111% increase) and e) “wheat bran and other residues” (88% up).


In the field, rice and wheat crops face other challenges. In terms of rice production costs, revenue is usually lower than total production costs and, in several cases, lower than operational costs. For wheat, the scenario is even more desperate: revenue hardly ever surpasses production costs and in most years, it does not even cover operational costs. In some crops, such as 2009/10, the government purchased almost three quarters of the production, aiming to ensure revenue to growers.


As revenue is not enough to cover total costs, growers struggle to attain sustainability in their activities, striving to pay back investments and/or make new investments. Therefore, for both agroindustrial chains, especially in agricultural production, there is an urgent need to define public policies, aiming to set the desirable direction in the upcoming years.


As for the rice chain, the gap between values of agricultural and industrial production is small. However, as consumption decreases, matters might worsen in the upcoming years. The wheat sector relies heavily on importations, while agricultural profitability is low. Is it possible to make domestic production more efficient at competitive prices? What are the necessary policies? Or is it admissible that importations are the best alternative? In this case, what is the alternative for producers in the South, where other crops are also less profitable? 


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