Brazilian agricultural income should reach 143.03 billion Brazilian reais (US$ 84.2 billion) in 2008, the highest estimate ever in the country. The projection was taken from a survey disclosed this week by Brazil's Ministry of Agriculture, Livestock and Supply.
Discounting inflation, the forecasted income is 14.4% greater than last year's, which totaled 125 billion reais (US$ 73.6 billion). Sugarcane, corn and soy crops represent 57.3% of that amount.
According to the coordinator of Strategic Planning at the ministry, José Garcia Gasques, several factors are contributing to the expansion of agricultural income in the country.
"The prices of agricultural products as a whole are much higher than they were last year. Soy and corn prices increased between 30% to 40% from January 2007 to January 2008 in the country's major producer regions," he says.
According to him, it is interesting to note that prices of other products, which are not considered as commodities, such as beans and cassava, are also expected to increase greatly this year.
The income estimate in the ministry's survey is based on data supplied by the Brazilian Institute of Geography and Statistics (IBGE) and includes 20 agricultural products. In a comparison between 2007 and 2008, discounting inflation, the products that should yield the greatest return are: peanuts, 41.9% increase; potatoes, 19.1%; coffee, 38.6%; beans, 85.4%; corn, 38.6%; soy, 23.1% and pepper, 13.5%.
"The rates express the actual increase in revenue for those products from 2007 to 2008," claims Gasques.
According to him, another contributing factor to the rising income is product quantity. Estimates by the IBGE and the National Food Supply Company (Conab) forecast a crop of around 140 million tons this year.
"It is the largest grain crop ever obtained in the country. Should we break down the 14.4% increase in revenue so as to separate the effects of price and quantity, then 35.7% of the expansion should take place due to greater quantity, whereas 64.3% should happen as a consequence of higher product prices," he explains.
In the assessment of Gasques, favorable international prices, low global inventories for some products, rising demand for food worldwide and the pressure of biofuels are the main factors leading to heightened price levels for grains and meats, compared with previous years.
"Agricultural performance is important, as its signals the behavior and trend of commodities to the market," he states.
The optimistic perspective regarding the increase in agricultural income this year is also going to ensure greater profitability to farmers, who faced problems in the 2005 and 2006 crops.
"The forecasted increase in revenue might certainly provide some financial relief to farmers. Besides, the effect should propagate throughout the economy, especially in small- and medium-sized cities, contributing to an acceleration of trade, services and the labor market," says Gasques.
With regard to profitability, Gasques notes that everything will depend on production costs. Based on data used by the Getúlio Vargas Foundation (FGV) to calculate the monthly index of prices paid by farmers, the costs of pesticides, fertilizers, fuels, services and labor have increased from 2006 to 2007. Fertilizers became 4.5% more expensive and labor, 9.4%. Prices for the remaining inputs have decreased. "Thus, it is possible that the 2008 crop will give off good financial returns," he guarantees.
The rise in agricultural revenue should also lead to an increase in the sector's Gross Domestic Product (GDP). "The growth in agricultural GDP recorded by the IBGE in 2007, of 5.3%, was a good result, the highest rate since 2003. Estimates available at the present time indicate that this year, the agricultural GDP should grow approximately 5%," says Gasques.
The ministry's survey also points out to products such as vegetable cotton, banana, cocoa, sugarcane, tobacco, tomato, wheat and grape, for which income should decrease compared with last year. "In the case of tomato, a relatively high reduction is expected, at 36.9%. The rates are expressed in actual terms, i.e., were calculated by discounting inflation, therefore the decrease represents a strong reduction. The main reasons are smaller production, lower prices, or both," he explains.
The figures in the survey are part of a monthly agricultural income follow-up, conducted by the Strategic Management Advisory at the ministry based on data from the Systematic Survey of Agricultural Production of the Brazilian Institute for Geography and Statistics (IBGE), and of the Prices Received by Farmers, compiled by the Getúlio Vargas Foundation (FGV).
Agricultural income was calculated by multiplying the crop production volume for the price received by farmers in the country's leading markets. The actual value of income (inflation discounted) is obtained from General Price Index-Internal Availability (IGP-DI) and the FGV.