Brazil Economic and Agriculture Outlook reveals that Brazilian agriculture has moved to the forefront of the global export scene becoming a major supplier to the global market. Brazil's land mass along with its acceptance of GMO crop technologies has allowed the country to compete with other major exporting nations in the corn and soy markets.

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Brazil's soybean exports have increased by 230% over a ten-year period. During that same timeframe, US soybean exports went from 41 million tonnes to 45 million tonnes, an increase of 10%. For Brazil that represents its share of the world soybean exports rising to 57%.

Governmental policy in general has been supportive to the agriculture sector along with intense regional backing and a domestic currency that has recently spurred record local prices which will continue to support further expansion. This is in contrast with the United States whose producers are struggling with prices at 10-year lows. For example, ethanol production and consumption has been a part of the Brazilian culture for many decades and as second crop corn production becomes a larger profit center for the Brazilian farmer, the domestic corn ethanol industry is beginning to expand. The RenovaBio program will create a large domestic demand level for biodiesel and subsequently vegetable/animal fat as a feedstock.

Brazil has also entered the global protein market as a major supplier of pork, poultry, and beef. Brazilian producers will be under continued global scrutiny surrounding the environmental impacts of pulling land into production moving forward.

The transportation sector has made many inroads towards lowering logistic costs for producers helping to increase margins and further improvement is expected. Trucking rates across Brazil, for the transportation of soybean exports, have been trending lower since spring 2018. Global agriculture companies have added port capacity increasing the ability for new monthly export records. Presently, these initiatives have returned costs to some of the lowest levels seen across the past five years.

The Brazilian economy struggled with a plunging Gross Domestic Product (GDP) following the outbreak of COVID-19 but in 2021, the government is expected to start its return to fiscal prudence and relaunch the privatization agenda, keeping public debt manageable. Given this, we do not expect that rating agencies will downgrade Brazil's sovereign rating and as result, the economy is seen as growing 3.8% in 2021 after plunging 6.4% in 2020.

IHS Markit estimates the deficit of the overall public sector for 2020 at above 15% of GDP. This should shrink to around 5% by 2024 as we are assuming the government will return to fiscal prudence in 2021 while passing a tax reform. In addition to the reduced policy rate, the Central Bank of Brazil has sizable ammunition to continue to provide liquidity and incentivize credit.

Brazil will face many challenges in the years ahead as the federal government is expected to struggle with new infrastructure projects due to a lack of foreign investors and rigid pre-requisites defined by federal government entities. Inability of federal government to suppress deforestation in the Amazon region will impact foreign investment opportunities. The livestock industry will need to plan for potential outbreaks of Foot and Mouth Disease, African Swine Fever and avian flu impacting Brazil's growing meat protein export business.

However, Brazilian producers will see increased yields and productivity derived from higher adoption rates for new technologies, which will foster growth and investment opportunities not only in crops but animal nutrition technologies as well. This not only includes seed genetics but also water management projects in the arid region of the Northeast focused on high value exportable products and supported by efficient irrigation equipment and managerial software.

The Bolsanaro government could create lending programs for farmers linked to environmental and sustainable farming practices to spur international investment. Although caloric meat demand is reaching peak levels in developing nations, beef and pork consumption is rising both in the Americas and Asia, along with cheap poultry prices supporting the market growth in all regions.

5 KEY QUESTIONS THIS REPORT WILL ANSWER ON BRAZIL

What is the size of the market and growth opportunity ?

What's the macro and political situation and how does it impact the agribusiness sector ?

What are the key commodities and their planted areas, production and yields ?

What are the trends and drivers in the livestock segment ?

How does Brazil perform against other countries ?

Contents:

Chapter 1: Introduction

Chapter 2: Macroeconomic status and trends includes a near-term outlook.

Chapter 3: Political scenario - covers Government stability, policy direction and predictability, and Opposition prospects and program

Chapter 4: Energy sector and biofuels

Chapter 5: Freight rates

Chapter 6: Agriculture and trade policy

Chapter 7: Agricultural crops: food and beverage sector, soybeans (supply, demand, price, cost of production), corn (as soybean), cotton (as soybean), sugarcane (supply, demand, price), coffee (prices), oranges (supply, demand), livestock (beef, pork, poultry)

Chapter 8: Agricultural inputs: farmland values, fertilisers (ammonia, urea, nitrates, nitrogen plants, phosphorus, potassium), crop protection and seeds

Chapter 9: Trends to watch

Chapter 10: SWOT Analysis

Please contact alan.bullion@ihsmarkit.com for any further information

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.