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Alongside the sugarcane and soyabeans that sprout from his fields in the interior of São Paulo state, this year José Odilon De Lima Neto plans on sowing a different crop for the first time.
“There may be an investment opportunity in wheat due to complications for summer planting in Ukraine and Russia,” said the farmer based near the city of Ribeirão Preto.
International prices for the cereal have surged since Moscow invaded its neighbour, reflecting worries that the warring nations — which together account for about 30 per cent of all wheat trade — will struggle to deliver to the dozens of countries that rely on them for imports.
As global food costs across the board touch record levels, according to a UN index, the conflict has compounded what the organisation’s food assistance agency says was already “destructive hunger”.
Thousands of miles away, the signals from this nutrition crisis are rippling out in the South American breadbaskets of Brazil and Argentina, major sources of everything from soy and beef to maize and oranges.
Many agricultural enterprises in the region are in line for a windfall from higher commodity prices, leading some such as De Lima Neto to expand output or even switch into new areas.
But at the same time, elevated costs or looming scarcity of crucial inputs — such as fuel, fertilisers and animal feed — risk dragging on their ability to help guarantee global food security.
Russia’s assault on Ukraine began after decisions had been made for the summer planting season in Latin America and Brazil’s second corn crop, making it harder for producers to react immediately, said Vitor Andrioli, an analyst at consultancy StoneX.
“A scenario where the conflict persists, and the prices of these commodities are sustained, would probably stimulate an expansion in the cultivation of grains and oilseeds on the continent,” he added.
Although Brazil’s largely tropical climates limit wheat cultivation, it has exported more of the grain this year than in the whole of 2021. With advances in crop technology, experts believe the country — a traditional net importer of wheat — has the potential to become self-sufficient and even a net seller in the future.
Caio Carvalho, president of the Brazilian Association of Agribusiness (Abag), cautioned that in the short term, however, the wider sector was unlikely to increase overall agricultural output hugely because of doubts over the duration of the war and where to ship to.
“Producers cannot go on an adventure and expand supply if they don’t have the security of a market to sell to,” he said. While Brazil has strong sales in China, the Middle East and Russia, many richer economies remain relatively closed to its produce, he added.
For now, Latin America’s dominant economy could assist in filling gaps in corn supply. Before the invasion, Ukraine was projected to be the third-largest corn exporter, just ahead of Brazil, according to a recent US Department of Agriculture report.
Similar to soy, it is mostly fed to animals, and Brazil is the third-largest producer behind only the US and China. Brasília’s state agriculture agency Conab estimates outbound corn shipments will increase by three-quarters in 2022.
“It is a great opportunity,” said Cesar Ramalho, a grower and president of the industry association Abramilho. “Corn is at a very inviting price for Brazil to increase production”.
Farmers in Argentina’s fertile Pampas region are planting more sunflower seeds to take advantage of the disruption. The plants adapt well to parched soil and need less fertiliser, an extra incentive given recent price rises for the chemical nutrients and forecasts for dry weather later this year.
But critics of the Buenos Aires administration warn state intervention and high inflation of more than 50 per cent are discouraging further activity in the farming sector.
Stricter protectionist measures, such as taxes of up to 33 per cent on exports and price controls on items such as bread, coupled with a chaotic exchange rate regime, could result in farmers waiting for domestic conditions to improve, they argue.
“The risk is that the signal to plant more won’t reach them, and that’s bad for everyone, not just Argentina,” said Gustavo Grobocopatel, who heads one of the country’s largest farming groups, Los Grobo. “Argentina should be producing 40 per cent more than it does [in agriculture].”
In addition, diesel shortages in Argentina have sparked trucker strikes — along with warnings about possible impacts on the harvest and transportation of crops.
Another challenge is that this highly productive corner of the planet is still emerging from a period of severe drought that has damped growth in agricultural output and inflicted financial harm.
For Brazil in particular one concern is fertilisers, which became more expensive before the war. The country imports 85 per cent of those chemical nutrients that it consumes, with about one-quarter from Russia.
“For the planting season in September, it’s going to depend a lot on the availability of fertilisers. A lack could lead to a drop in productivity,” said Carvalho of Abag. “I’m very worried.”
On the other side of the commodities rally buoying arable farmers, meat producers who rely on grains as animal feed are feeling the pinch.
Already the world’s largest exporter of beef and chicken, analysts said Brazil could replace any volumes lost because of the war in Ukraine.
Yet in certain meat categories, overseas demand is failing to offset higher input costs and weakened purchasing power at home, where poorer consumers are cutting back on the basics amid double-digit inflation.
In Brazil’s central-west state of Goiás, pig farmer Euclides Costenaro is at the sharp end of oversupply and falling sales values. Like many of his peers he is downsizing his herd, from 5,000 sows to about 3,800.
“Today each producer loses from R$200 to R$350 [$43 to $75] for each hog he resells,” he said. “The damage is very heavy, we have never experienced this before.”
There are also difficulties for some livestock ranchers, such as Nabih Amin El Aouar, who has 3,000 head of cattle in the state of Espírito Santo.
“Exports have accelerated, but this does not fully compensate for the drop in domestic consumption,” he said.
Additional reporting by Carolina Ingizza in São Paulo
Source: This post first appeared on Duk News
