Brazil

GIEWS Country Brief: Brazil 05-October-2020

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HIGHLIGHTS

  • Cereal production in 2020 forecast at record high due to large plantings of maize and wheat

  • Exports of cereals in 2020/21 marketing year forecast at high levels

  • Prices of cereals higher year on year due to strong demand and weak currency

  • Social protection expanded for vulnerable households amid economic downturn

Cereal production in 2020 forecast at record high due to large plantings of maize and wheat

Harvesting of the 2020 main maize crop, which accounts for nearly 75 percent of the annual output, was completed in August. Production is officially estimated at well above‑average level of 74.9 million tonnes due to the record planted area, driven by high domestic prices and strong export demand. Yields are also estimated to be above average despite dry weather conditions in the main producing states of Mato Grosso do Sul and Paraná. Harvesting of the 2020 third season minor maize crop will start from October in northeastern areas. Production prospects are favourable reflecting good weather conditions that have boosted crop yields. The 2020 aggregate maize production, including the first season crop harvested in the second quarter of 2020, is anticipated at a record high of 102.1 million tonnes, nearly 20 percent above the previous five‑year average.

Harvesting of the 2020 wheat crop started recently and production is anticipated at a record level of 6.8 million tonnes, about 25 percent above the previous five‑year average. The anticipated bumper output mainly reflects a rebound of sowings from the low levels of the previous years, driven by remunerative prices. In the main producing southern areas, while favourable weather conditions supported early crop development, frost and heavy rainfall amounts in late August affected yields of crops at flowering and ripening stages.

Harvesting of the mostly irrigated paddy crop was completed in May and production in 2020 is officially estimated at a slightly below‑average level of 11.2 million tonnes. The low‑level output mainly reflects record low sowings, which have been steadily declining over the past 30 years due to farmers’ shift to more remunerative maize and soybean crops.

Exports of cereals in 2020/21 marketing year forecast at high levels

Exports of maize, the country’s major exportable cereal, are forecast at high levels of 34 million tonnes in the 2020/21 marketing year (March/February). The anticipated large volume of exports reflects the abundant supplies from the 2020 harvest and strong international demand supported by the weak local currency. Nevertheless, exports are expected to be lower than the record levels in 2019/20 due to the increased demand by the domestic ethanol production industry.

Exports of rice in 2020 (January/December) are anticipated at an above‑average level of 1 million tonnes, supported by high demand on the international markets.

Prices of cereals higher year on year due to strong demand and weak currency

Wholesale prices of yellow maize increased in July and August, in spite of the ongoing main season bumper harvest. The increase is mainly driven by the strong demand by the feed sector as well as for exports, supported by the weak national currency.

Prices of rice levelled off in August after the sustained increases in the previous months and were 40 percent higher year on year, underpinned by strong demand.

Prices of wheat are on the increase since late 2019 and strengthened further in August in line with seasonal trends. Prices remained well above their year‑earlier values mainly due to the country’s weak currency, despite larger import quantities during the second quarter of 2020 compared to the same period last year.

As of August, prices of all cereal crops were well above their year‑earlier levels due to strong export demand that reflect the sustained weakening of the local currency. The Brazilian Real started to depreciate in early 2018 and had lost more than 30 percent of its value as of early September 2020 over the past 12 months. In order to contain the price increases, the duty free wheat import quota for non‑Mercosur countries in 2020 was increased from 750 000 tonnes to 1.2 million tonnes and tariffs on imports of paddy and milled rice were suspended up to 400 000 tonnes until the end of 2020.

Social protection expanded for vulnerable households

Projections of the Economic Commission for Latin America and the Caribbean (ECLAC) of the United Nations indicate that the economic effects of the COVID‑19 pandemic containment measures are expected to result in a negative Gross Domestic Product growth, up to -9 percent in 2020. The anticipated economic downturn is likely to have a negative impact on the access to food of vulnerable households with high risk of income/job losses.

To mitigate the negative impact, the Government is scaling up its social protection and assistance programmes. In April 2020, the Emergency Aid was launched and granted subsidies of BRL 600 (about USD 155 and equivalent to approximately 60 percent of the minimum wage) for three months to 54 million people, mainly informal and low‑income workers and the unemployed. In May 2020, 1 million beneficiaries were added to the existing Transfer programme, Bolsa Familia, which delivers on average a monthly grant of BRL 145 (about USD 37) per household.