Mixed Prospects for Brazilian Agri-food Sectors in 2014

BRAZIL - The country's growth in GDP is expected to slow this year to no more that two per cent. In its agri-food sectors, the prospects are positive for poultry meat, beef, soybeans and ethanol while growth in corn (maize) and sugar look less likely.
calendar icon 19 March 2014
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The production outlook for many of Brazil's most important agricultural crops in 2014 is extremely good, with the possibility of record-breaking levels for some, reports Rabobank in its report, 'Brazil Agribusiness Outlook 2014'.

One downside is that weak international prices for many of the country's agricultural commodities are expected. And with production and export volumes set to rise again, and a further increase in transport fuel costs implemented at the end of 2013, there is little chance of lower logistics costs during the year.

A silver lining could be the weakening of the BRR/US$ exchange rate, which would offset some of the impact of lower world prices on margins.

Macro-economic Outlook

Brazil's economy is slowing. GDP growth for 2013 is estimated at 2.2 per cent, while current expectations are that the country's economic growth will fall to 2.0 per cent, or even lower, in 2014.

The domestic market, already carrying increased levels of debt as a result of easier credit access, and dealing with rising interest rates and a substantial inflation rate, will likely not be a source of economic growth.

While some growth could come from exports, in its recently published 'Brazil Agribusiness Outlook 2014' report, Rabobank argues that the country's export competitiveness has been hit by rising costs, predominantly in the services and logistics area. One positive would a weakening of the BRR/US$ exchange rate, which would offset some of the impact of lower world prices on margins.

Sector Summaries


The outlook for global poultry players in 2014 is generally positive, based on expectations that the price of grains will continue to decline and markets for competing meats, especially beef, will be tight. However, the growth of global trade is expected to be modest (one to two per cent), suggesting that the direction of international prices will be very much dependent on the aggregate growth of exportable supplies from major exporters.

In Brazil, the poultry sector is well aware of the export market’s vulnerability to oversupply and has announced modest ambitions for export volume growth in 2014.


Brazilian beef exports are expected to continue to grow in 2014, after the sector broke export records in 2013.

This is being driven by a number of factors, including declining supply from key exporters, such as Australia and the US; robust import demand in regions such as Asia; the potential for greater market access in countries such as Thailand, Myanmar and Cambodia, while negotiations are under way to increase access to the Chinese market, the US and Saudi Arabia; and the likelihood of a weakening exchange rate over the year, which will boost the relative competitiveness of Brazilian exports.


Brazil's soybean-producing regions were impacted by a moderate drought during the final two months of 2013, with the Midwest region hit hardest. A severe reduction in yields of up to 15 per cent is only expected to hit about 30 per cent of the crop in that region, though, as January brought a significant improvement to the weather. Good yields are expected to offset any possible erosion in margins.

The country's soybean production area is projected to increase by two million hectares (seven per cent) in 2014, as the crop becomes more economically attractive than corn for producers. This growth in areas used for soybean cultivation could continue, driven by the expectation of another year of positive margins for the crop.


Brazil's corn production in 2013/14 is expected to drop significantly from the previous year, down 11 per cent to 72 million tonnes. With global supply expected to exceed demand in 2013/14, this is a pragmatic reaction from Brazil's corn producers.

For 2014, expectations of a weakening of the BRR/US$ exchange rate should at least partially offset the decline in dollar-denominated corn prices, benefiting Brazil's corn farmers.

Sugar and ethanol

The initial outlook for sugar and ethanol indicate they will take opposite paths in 2014.

For sugar, the strong build-up of global stocks after three consecutive surpluses and the expectation of another surplus in 2013/14 suggests limited potential for significant upside.

Ethanol should fair better, with 2014 prices expected to be slightly higher than 2013, following a four per cent increase in Brazil's gasoline price in late 2013 and the growing fleet and fuel consumption in the country.

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