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Government wants to act before crisis hits agribusiness, minister says

Officials project scenarios for extending investment installments, creating new lines of financing, and measures to support commercialization

01/25/2024

Carlos Fávaro — Foto: Edilson Rodrigues/Agência Senado

Carlos Fávaro — Foto: Edilson Rodrigues/Agência Senado

The combination of a predicted shortfall in Brazil’s grain harvest and continued low international commodity prices has created a scenario that is as rare and complex as it is potentially damaging to rural producers and challenging for agricultural policy in 2024, according to Agriculture Minister Carlos Fávaro.

The focus of the ministry will be to anticipate the “imminent crisis” and announce measures to help farmers before the end of the soybean harvest, the minister told Valor. The intention is to avoid an environment of debt and damage before taking action. He also believes that the second corn harvest will be smaller than originally predicted.

Mr. Fávaro informed President Lula of the situation in a phone call on Tuesday and will meet with Finance Minister Fernando Haddad next week to discuss measures to minimize the financial impact on farmers.

Faced with budgetary constraints and still incipient data on losses in the soybean harvest that has just begun across the country, government officials are doing the math and only projecting scenarios for possible extensions of investment installments, the creation of new lines of financing, and the implementation of measures to support marketing.

Mr. Fávaro acknowledged that “the profitability of this harvest is already gone, even for the highly productive ones”—due to the still high production costs and the impact of the climate on the average yield—and that 2024 will be an atypical year. “We will work with what we have and minimize the impact so that we can grow again in the 2024/25 harvest,” he said. “Now we have to do everything we can to move forward with as little impact as possible,” he added.

“Many producers will harvest less and some much less than last year. The drop in production with low prices sends up a red flag, so we have to act very quickly. It’s a rare scenario, but when it happens it becomes very serious,” said Mr. Fávaro.

The minister emphasized that one of the proposals on the table is to extend the investment installments, which could generate costs for the National Treasury. Internal analyses are being carried out to determine how many and which contracts may need to be extended, given that production in some regions of the country will be less affected, as well as the interest rates on these loans. For example, the technical team is evaluating the volume of operations contracted since the 2016/17 harvest in the Moderfrota, Pronamp Investimento and Inovagro lines, which mature in 2024.

“With the prospect of a decrease in the Selic policy rate, if the rate is closer to the interest charged on these operations in previous years, the subsidy will be small. We can try to find a space here,” said Mr. Fávaro. He noted that the budget is limited and that he will not do anything that could jeopardize the government’s fiscal targets.

The minister said the measures should not be delayed to avoid side effects in the agribusiness sector, such as defaults, producers being denied credit, lack of access to new credit, and an increase in debt. Some measures should be announced before March, he said.

The Ministry of Agriculture is also working with the Brazilian Development Bank (BNDES) to create a line of credit in dollars with an extended term for working capital, which could help retailers and other companies give a boost to rural producers who finance their activities with private loans. Mr. Fávaro said there could be other measures, but did not provide details.

*Por Rafael Walendorff — Brasília

Source: Valor International

https://valorinternational.globo.com/

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Climate change is greatest risk to agribusiness, survey shows

Infrastructure hurdles are second greatest risk; low-carbon agriculture comes in third place

01/11/2023

An EY survey with agribusiness executives in Brazil, Argentina, and Chile showed that climate change and its short and long-term impacts are the main risks they see for their businesses. The study listed the top ten risks and opportunities that agribusiness executives face in their businesses.

According to the survey, 47% of the executives and investors consulted might reconsider their investments based on climate risks. And for 82% of those consulted, climate change represents a “high” risk to their businesses.

EY divided the risks to agribusiness associated with climate change into six types, with different weights. Contrary to what many industry leaders say, reputational risk is one of the lowest, accounting for 12% of the risks related to the problem. The biggest risk in the list is “acute,” such as abrupt changes in precipitation and temperatures, and extreme weather such as droughts and storms.

EY survey sees political and legal risks at 19% of the total risk. They relate to enhanced disclosure obligations for greenhouse gas emissions, exposure to litigation, rising emissions prices, and existing product mandates or regulations. At the same level (19%) are technology risks, which involve the costs of transitioning to a lower emissions model of production and services, and unsuccessful investments in new technologies.

Difficulties in accessing markets were seen as 15% of the risks related to climate change. They involve changing consumer behavior, increasingly unwilling to consume products with high emissions footprint, as well as rising costs of raw materials with higher carbon footprint and uncertainties in market signals.

Reputational risks are seen as 15% of climate change-related risks, as are chronic risks (15%) involving long-term changes in average precipitation levels and temperatures, biodiversity loss, and sea level rise.

After climate change, respondents from agribusiness companies understand that the second greatest risk is infrastructure hurdles, with inadequate roads, concentration on road transport, and static capacity limitations.

The third most cited aspect by respondents is an opportunity: low-carbon agriculture.

Next, were cited issues related to increasing productivity, cost management, and asset management; restrictions on the use of agrochemicals and pesticides; issues of ethics, compliance, and control; government interventions, regulatory changes, and reforms; shortage of skilled labor and implementation of an agile and innovative culture; financial profitability, currency volatility management, and margins; and finally, professionalization and evolution of the governance and succession model.

*By Camila Souza Ramos — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Rumo, Andali start operations in fertilizer terminal in Goiás

Project will enable transportation of fertilizers from Port of Santos to this central state

08/09/2022

Rumo and Andali, a joint venture between U.S.-based agribusiness cooperative CHS and BRFértil, will officially start operations in a fertilizer terminal on the North-South Railway in Rio Verde, Goiás, on Tuesday. The project will enable the transportation of fertilizers from the Port of Santos, in São Paulo, to Goiás.

The state’s agribusiness is mostly served by trucks now. The railroad is expected to allow moving 60% to 70% of the volumes used in the region.

Freight transportation in this railroad, which Andali had already started in a preliminary way in April, is expected to reach 500,000 tonnes later this year and 800,000 tonnes in 2023, Andali CEO Rafael Vaccari Gonçalves said. The company expects to reach 1.5 million tonnes per year by 2025. “This solution comes to reduce costs and provide more efficiency,” he said.

Besides the terminal, a fertilizer mixing plant was built on the site with a capacity expected to reach 750,000 tonnes next year. The company is investing R$160 million in the project.

Andali already had a terminal in Rondonópolis, Mato Grosso. With the new structure, the executive said, the company’s capacity is expected to more than double and reach 6% of the country’s total volume.

This is also Rumo’s fourth terminal in the so-called Malha Central (Central Network), the concession that operates the central stretch of the North-South Railway. The project consolidates the logistics complex the operator is building in Rio Verde. The company had already built a grain terminal there. Besides this, the company plans to conclude by mid-2023 a new fuel terminal in the city, which is being built in partnership with Dinâmica Terminais de Combustíveis (DTC).

By next year, a new container terminal is likely to start operating in Anápolis, Goiás – a partnership between Porto Seco de Anápolis and Brado, Rumo’s arm for railway container transportation.

Rumo already has plans for new terminals in Malha Central to handle grains and soy meal in the north of Goiás and the south of Tocantins, said Pedro Palma, the company’s chief commercial officer. However, there is still no timetable defined for this next stage of the project.

The construction of the central stretch of the North-South Railway is virtually concluded, the executive said. There is still a short stretch between Palmeiras de Goiás and Ouro Verde de Goiás, which is expected to be delivered by the end of the year.

“We are going according to plan on Malha Central. Rumo is close to reaching a 30% share in the grain market in Goiás,” he said.

In relation to Malha Norte, Mr. Palma said the company is making adjustments for the beginning of construction. Rumo has already started commercial prospecting for the railroad, whose terminals are also likely to follow the model of Malha Central – they will be independent facilities built in partnership with customers.

However, he said these agreements will be signed later. “The advantage, in this case, is that we already operate in Mato Grosso, where we already have good relationships,” he said.

*By Taís Hirata — São Paulo

https://valorinternational.globo.com/
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Yara issues R$520m in agribusiness receivables certificates

Resources will be used to facilitate fertilizer purchases by 26 input dealers and cooperatives

07/25/2022

The Brazilian subsidiary of Norwegian Yara, one of the largest fertilizer suppliers in the world, has just announced the issuance of R$520 million in Agribusiness Receivables Certificates (CRA), the fourth operation of this kind in the country.

The resources of the issuance, structured by the securitization company Ecoagro, with the distribution of the fixed income bonds to investors coordinated by Banco Alfa, will finance the purchase of fertilizers by 26 input dealers and cooperatives. The multinational’s main purpose is to facilitate the acquisition of inputs from its client network, reinforcing its customer loyalty strategy in the Brazilian countryside.

This is the largest CRA operation that Yara has ever made in the country. The amount is higher than the total of the two operations conducted in 2021, when it raised, in total, R$ 335 million.

The demand for rural credit has increased this year, and money, like fertilizers, is more expensive in Brazil. “We understand that meeting our customers’ business needs goes beyond having the best solution in plant nutrition,” says Maicon Cossa, Yara’s commercial vice president in Brazil.

The focus is soybeans, but there are no restrictions related to crops. The movement ends up benefiting agricultural producers, who, in turn, get better payment conditions to buy inputs at the dealers. “Even though this is not Yara’s core business, and, for this reason, we seek partners for these operations, the idea is to contribute with the producer in seeking financial solutions to make cultivation feasible,” Mr. Cossa says.

According to him, Yara does not measure the universe of farmers that it reaches with the credit offer, since it does not control how resources are passed on in the distributor channel. The executive states, however, that the network of 26 dealers and cooperatives reaches mostly small and medium producers and that the action can reach “much more than 2.000 farmers”.

According to Milton Menten, CEO at Eco Securitizadora, the resource was taken by the borrower (input dealers) at interbank deposit rate (CDI) + 1.80%, which he considers a “very good rate at this moment of the market.” The deadline for repayment is one year, much longer than the one practiced by the fertilizer industry. According to the financial agents, the demand exceeded the offer.

“The engineering of the operation and the investor’s appetite offered credit under conditions that dealers would not have individually, says Augusto Martins, head of Corporate & Investment Banking at Alfa.

“The interest in agribusiness grows every semester because it reflects the advance in governance structures of the companies. To access the capital market, it is necessary to follow a rite and a series of conditions that the Securities and Exchange Comission (CVM) imposes,” Mr. Martins says.

Eco Securitizadora issued R$8.4 billion in CRA in the first semester, an amount three times higher than in the same period of 2021. Alfa, in turn, coordinated R$3 billion in operations in the electric, sanitation, and agricultural sectors in the first six months of this year, which represented an increase of 51%.

*By Érica Polo — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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EU unwilling to ease control on Brazilian chicken

Official tells Valor measure is about wrongdoings, not deforestation

06/01/2022

Five years after imposing stricter controls on the sales of Brazilian chicken meat, the European Union has signaled that it has no plans in sight to suspend the measure, despite persistent demands from the Brazilian side.

In Brazil, the complaint is that the EU’s Directorate General of Health (DG Health) is, in practice, linking sanitary and phytosanitary measures (SPS) to deforestation issues, delaying the search for a solution to the problem, which affects millions of dollars in business.

To Valor, the EU said that “this is not correct”. According to a senior European official, “the current measures [of strengthened control over meat] are related to cases of fraud involving authorities and to the results of successive audits that have identified repeated deficiencies that demonstrate the unreliability of the Brazilian certification system.”

The official recalled that the strengthened control — 100% documents and 20% through physical and laboratory inspection (in Brazil and the EU), something unusual — was adopted in 2017 after the operations “Carne Fraca” and “Trapaça” in Brazil, which had negative results in the EC audits in the segments of meat and fish.

The source noted that while the fraud scandals involved officials at the Agriculture Ministry in illegally exporting cargoes to the EU and other countries, the 2017 audits showed “that the deficiencies identified by previous audits had not been corrected, despite the promises made.”

According to the EU, “in these circumstances the protective measures cannot be lifted and the authorization of additional sellers (re-authorizing the pre-listing procedure), additional products (pork, dairy, eggs) or additional production areas (for export) cannot be considered until a follow-up audit shows that corrective measures have been implemented to rectify the deficiencies and prevent fraudulent export practices.”

“For the EU, only a favorable outcome of an audit in Brazil will allow the European Commission to propose to the 27 member states to lift the current control on Brazilian chicken meat.” The commission has included an audit in Brazil in its work program for 2022. However, it has already warned that the feasibility of doing it “will depend on the evolution of the audit backlog caused by the pandemic and the need to ensure the safety of auditors in the current epidemiological situation of Covid-19.”

The strengthened control causes an additional cost that is ultimately discounted from the price of chicken. The EU mentions this “lack of confidence” in the Brazilian sanitary certification system (and despite all the controls), but also has Brazil as the supplier of 20% of all the chicken meat it imports.

Between January and April this year, the block imported 71,700 tonnes of Brazilian chicken meat, 27.8% more than in the same period last year, according to the Brazilian Association of Animal Protein (ABPA).

The finding, both in Brazil and in Europe, is that there has been a deterioration of the dialogue with DG Health of the EU. The situation has worsened since November, when Brazil denounced the EU at the World Trade Organization (WTO) because of “discriminatory sanitary controls for the detection of salmonella in salted chicken and turkey meat with pepper.”

There has been a “gigantic logjam” in bilateral talks ever since, deepening the sanitary mess started under the previous administration. In 2017, soon after the announcement of “Carne Fraca”, the EU sent an audit team to Brazil, with Irish veterinary inspectors, despite all the pressure that European producers were putting in the opposite direction.

The Europeans inspected several businesses and returned with a good impression. A draft of a positive report was ready when “Trapaça” broke out, involving food processing giant BRF and third parties laboratories that controlled the exported chicken meat.

The Irish vets felt betrayed, as they were not informed that this additional Federal Police operation was underway. Officials from the Ministry of Agriculture knew, as they were following the Federal Police, but apparently were forbidden to inform them. The Irish inspectors were left with their reputation threatened, since they advocated a return to normal relations with Brazil.

The situation was made worse when the then Minister of Agriculture, Blairo Maggi, did not remove BRF from the list of exporters even after the scandal involving the company. This forced the EU to issue a specific regulation removing all the company’s units, and a few others, from the list of exporters to the European market, which is unusual. Normally, Brussels suggests the blockade and the exporting country itself removes the meat packing plant from the list, which makes it easier to return.

After this, BRF, which has long ensured that there were no wrongdoings in its products, filed a complaint at the EU court disputing the regulation that barred its sales. It failed and was banned from exporting for human consumption, while entering in the radar zone of European surveillance. On top of that, the Europeans don’t even want to schedule meetings to talk about the suspension of the strengthened control.

Source: https://valorinternational.globo.com/agribusiness

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Unigel raises bet on agribusiness, fertilizers

Daniel Zilberknop — Foto: Claudio Belli/Valor
Daniel Zilberknop — Foto: Claudio Belli/Valor

Unigel, one of Brazil’s most traditional petrochemical companies, is focusing on agribusiness after Russia invaded Ukraine. Months after restarting the operation of two fertilizer plants leased from oil giant Petrobras, which contributed to 2021 being the best year ever, the company will expand local production of strategic inputs for nitrogen fertilizers and chemicals that are currently 100% imported.

“In the medium term, we have growth plans in all three fields: agribusiness, acrylics and styrenics. But today the major focus is on agriculture because we can see Brazil’s reliance on imported fertilizers. This exposure makes us want to invest more,” said Daniel Zilberknop, Unigel’s chief financial officer.

The company, which is the largest producer of acrylics and styrenics in Latin America, could be exposed to the risks of shortages generated by the war. By leasing Petrobras’s fertilizer units in Bahia and Sergipe, which were previously idle, Unigel became the only local producer of ammonia, used in fertilizers and in the acrylic chain. Before, this raw material had to be 100% imported, and Russia accounts for 23% of the global supply.

Unigel Agro will complete the business portfolio and integrate the company’s other operations, first in the case of ammonia and now in sulfuric acid, Mr. Zilberknop said. There will be more developments ahead, and green hydrogen and green ammonia are on the company’s radar.

At this moment, the company is investing $100 million in a new plant for the product in Camaçari, Bahia, which will be used to reactivate an ammonium sulfate plant (a nitrogen fertilizer), which came in the package of assets leased from Petrobras – sulfuric acid is used in the production of both fertilizers and acrylics, and the steam generated in the production process is used as energy in the styrenics operation.

To reactivate the nitrogen fertilizer plants, the company had already disbursed about $100 million. “Before, we navigated more the petrochemical cycle. With Unigel Agro, the scale has also changed. We intend to expand into agribusiness production, further integrating our business,” the executive said.

Last year, while the stronger petrochemical spreads boosted performance in the first half, the full operation of the nitrogen fertilizer plants has driven the results at a time of weaker spreads – in the year, the results in acrylics and styrenics also grew compared to previous years, with a greater focus on operational efficiency.

Unigel ended 2021 with gross revenue of R$8.49 billion, more than double what was reported in the previous year, and EBITDA of R$1.7 billion, a more than threefold increase. The net income reached R$882 million and the cash generated by operational activities more than doubled to R$1.1 billion.

After a ramp-up in the nitrogen fertilizer plants in August, Unigel became the largest nitrogen fertilizer manufacturer in the country. The business had a relevant contribution in the results in 2021, accounting for 25% of the gross revenue and 33% of the adjusted EBIDTA.

Today, Unigel Agro’s installed capacity is 925,000 tonnes per year of ammonia, 1.125 million tonnes of urea, 670,000 tonnes of ammonium sulfate and 220,000 tonnes of Arla, used to reduce emissions from large vehicles.

In the executive’s view, the war in Ukraine brings direct consequences for the oil and gas and fertilizer markets but for now is not a reason for concern for Unigel Agro, which uses gas in the production of urea and ammonia.

Considering local supply contracts with Petrobras and Shell, assured demand and raw material hedging, the operation is expected to smoothly navigate the conflict. Russia is the largest exporter of ammonia and urea in the world and one of the biggest players in NPK fertilizers, which caused the prices of these inputs to skyrocket as the country was sanctioned for the invasion of Ukraine.

Unigel ended 2021 with R$849 million in cash reserves and will be able to face the investment in sulfuric acid with the funds generated by its businesses. The company was on its way to selling shares on the stock exchange but suspended the IPO in the second half of last year amid deteriorating market conditions.

“The company is at its best moment and is able to invest in growth with deleveraging,” the executive said. At the end of the year, Unigel’s net debt, of about R$2.1 billion, accounted for 1.2 times the annualized EBITDA, a ratio seen as comfortable by rating agencies.

Source: Valor International

https://valorinternational.globo.com

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Agribusiness exports grow 65% in February

Soy export in Paranaguá — Foto: Fabio Scremin/APPA
Soy export in Paranaguá — Foto: Fabio Scremin/APPA

Brazilian agribusiness exports reached $10.51 billion last month, 65.8% more than a year earlier and a new record for February, according to data from the Secretariat of Foreign Trade (Secex) compiled by the Ministry of Agriculture. So far, the best February ever had been 2019.

Both the average prices of exported products and volumes increased and helped the result — rising 24% and 33.7%, respectively. As a result, the share of agriculture in Brazil’s total exports grew again and reached 45.9%. In February 2021, the share was 38.7%.

The sector’s trade balance saw a surplus of $9.2 billion, as imports dropped 2.1% in February, to $1.25 billion, despite the increase in average prices of several imported products, such as wheat, malt, salmon and palm oil.

Imports compiled by the ministry do not consider inputs used in the sector, but it released a balance of purchases of these products in February – fertilizer imports increased 124.1%, to $1.63 billion. The average price grew 128.7% in the period.

“It is important to point out that, in February, the survey of international fertilizer prices carried out by the World Bank indicated an average price increase of almost 100% in the last 12 months. To clarify this point, the volume of fertilizers imported by Brazil was about 2% lower compared to February of the last two years (2021 and 2020): from 3 million tonnes in February 2021 to 2.94 million tonnes in February 2022,” the ministry said. The main fertilizer suppliers to Brazil were Russia, Canada, China, Oman and Qatar.

The positive performance of agribusiness exports in February was driven by shipments of soy beans, fresh beef, green coffee, soy meal, fresh chicken and wheat, the latter a product that typically makes up the country’s import basket.

The volume of soybeans exported was a record in February, with 6.27 million tonnes, up 137% compared to the same period last year, when 2.6 million tonnes were shipped.

The value of these shipments saw an even more expressive increase, 203%, to $3.1 billion from $1 billion. The average price per tonne increased 28%, to $501 from $392.

China is the largest importer of soybeans from Brazil. In February, the Asian country increased the amount purchased by 130%, reaching 4.3 million tonnes, about 69% of all Brazilian soybeans sold to the world. The amount paid for the product increased 186.6% year over year and stood at $2.17 billion.

With the normalization of sales to China, exports of fresh beef grew by 75.1%, reaching $965 million. The volume exported increased by 42%, and the average export price grew by 23.3%.

China doubled the value of purchases compared to February 2021, to $546.49 million and 87,100 tonnes from $261.79 million and 56,410 tonnes.

Foreign sales of chicken meat rose 26%, to $643.11 million. The increase in the average export price was 18.8%, and 6% in the volume exported.

Brazilian exports of green coffee increased 83.5% in price. Brazil exported 208,500 tonnes, up 9.1% from 2021.

The ministry also highlighted wheat in the list of the main products exported. “The grain exports exceeded imports: $246.3 exported (836,600 tonnes), compared to $141.58 million imported (498,800 tonnes).”

According to a report by the Center of Advanced Studies on Applied Economics (Cepea) of the Luiz de Queiroz College of Agriculture (Esalq/USP), the favorable conditions of international prices and the greater external acceptance of wheat with lower pH, a characteristic of the local product, have driven the increase seen in Brazilian exports.

Source: Valor International

https://valorinternational.globo.com

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Startup digitalizes agricultural commodities trading

Based in Minas Gerais, Grão Direto has German giant Bayer among investors

05/03/2022

Frederico Marques, Alexandre Borges and Pedro Paiva — Foto: Divulgação

Frederico Marques, Alexandre Borges and Pedro Paiva — Foto: Divulgação

When a farmer has a crop to sell, he has to deal with a series of phone calls to get the best offer for his products or even exchange grains for fertilizers and pesticides, in an analogical — and sometimes stressful — process that can last over a week until the contract is signed.

Grão Direto — a startup created by three friends who have known each other since childhood in Uberaba, a country town in Minas Gerais state — wants to change this logic, digitalizing the negotiation of agricultural commodities by connecting rural producers from all over the country to the most diverse buyer profiles, from large trading companies to feed mills and grain warehouses.

Little by little, the agtech founded by the trio Frederico Marques, Alexandre Borges and Pedro Paiva has been gaining traction, and attracting more and more investors. This time, Grão Direto brought to its shareholders the trading companies Amaggi, ADM, Cargill and Dreyfus, which are among the main grain buyers in the country — on the list of big companies, only Bunge and Cofco are not included, for the time being.

To scale up the operation, Grão Direto has raised R$40 million in the third round of investments. In addition to the minority contribution of trading companies, investors who had already supported the startup in the first funding rounds followed.

The list of shareholders also includes names such as the German giant Bayer (the largest seed company in the world), the managers Lanx Capital and Barn, the investment arm of the Rendimento Group, as well as individual investors. Since it was founded in 2017, Grão Direto has raised R$58 million.

“Agribusiness is probably one of the last multi-trillion markets without a marketplace in the physical market,” Alexandre Borges, founder and CEO of Grão Direto, told Pipeline, Valor´s business website.

In the world, agtechs such as Argentina’s Agrofy, the U.S.-based FBN, and Orbia have already advanced in building a marketplace for agricultural inputs, but the journey to creating an ecosystem for trading commodities (in Brazil, mostly grains) is still in its infancy.

Not by chance, Grão Direto managed to attract trading companies, which are also clients of the platform. But the pioneering does not mean that the startup is alone in the market. In Brazil, agtechs such as Tarken (founded by Luiz Tângari and Carlos Neto, the entrepreneurs behind Strider), sold to Syngenta, are also building a grain marketplace.

“Startups are less of a competitor and more of a facilitator for the digitalization of the agribusiness to happen faster. Our main competitors are the inefficient and analogical negotiations,” argues Mr. Borges.

In the Grão Direto model, rural producers have no cost to negotiate grain. So far, the agtech application has had 200,000 downloads. Last year, the startup hit 1 million tonnes traded — a small volume for the size of national production, but a milestone for the business.

To monetize the business, Grão Direto offers services such as digital contracts, which can also be hired by farmers and trading companies. On the buyers’ side, the startup charges a fee per deal closed. In the future, Grão Direto will also get into credit, offering the anticipation of receivables for producers.

With the available data and real-time connections to commodity exchanges, Grão Direto can also offer insights and help producers price their product, pondering variables such as freight. “Our system updated prices more than 1 billion times in 2021. It’s as if we replaced 1 billion phone calls,” jokes the CEO of Grão Direto.

To make the commodities trading platform be accepted by all, the principle is that the strategic partners are minority. Inspired by the New York stock exchange, built by brokerage houses, Grão Direto wants to involve most of the agribusiness players.

“We will bring in other strategic operators in new rounds. The idea is to have diversity, with the entry of rural producers as well. More important than control is to maintain neutrality and independence,” says Mr. Borges.

Due to the involvement of the trading companies, the conclusion of the round depends on the approval of antitrust regulator Cade.

Source: Valor International

https://valorinternational.globo.com
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How Russia-Ukraine conflict affects Brazilian agribusiness

AGROBUSINESS

It is impossible to talk about pros and cons in the face of a war. There are only “cons”, and for Brazilian agribusiness they are multiplying with the escalation of tensions between Russia and Ukraine.

An immediate reflection of this escalation, grains prices soared on the international market. It is true that Brazil is a major exporter of soybeans and corn and can even benefit from the increases in prices of both commodities, but the country is also one of the largest importers of wheat, with prices rising the most.

Among the “soft commodities”, sugar and cotton, which are directly influenced by oil prices, are also on the rise and the curve may favor Brazilian exporters. But prices of coffee, cocoa and orange juice, equally important for the country, are falling.

In common to all agricultural products, fertilizers, which are already much more expensive since last year, will certainly increase even more, and with the expectation of increasing sanctions on Russia, one of the main exporting countries of the input in the world, the supply scenario is bleak.

It is always good to remember that, despite being the largest net exporter of agricultural products in the world, Brazil imports around 80% of the fertilizers used in crops. So, if rural producers manage to buy everything you need in the market this year without Russia — and without Belarus, also an important supplier, which is no longer able to sell because of U.S. and EU sanctions —they will have to pay much more for input.

The result of this equation points to increases in the prices of basic grains for human and animal food and sugar, essential even for the poorest population, could be more inflation. The calculation also takes into account the effects on production costs and prices of cheaper proteins such as chicken meat and eggs.

Russia and Ukraine are, respectively, the first and third largest wheat exporting countries in the world, behind only the European Union. So far, the U.S. Department of Agriculture (USDA) estimates that, together, they would ship 59 million tonnes in this 2021/22 season, almost a third of the total forecast. According to the USDA, the two countries would also be responsible for shipments of 38 million tonnes of corn, or 20% of the total volume.

In the case of fertilizers, Russia leads global exports of nutrients derived from nitrogen, is the second largest country in shipments of potassium products and the third in phosphates. The country recently suspended shipments for two months, but the flow was expected to resume by the beginning of April, which is now pending. In the fourth quarter of 2021, urea, for example, was already 245% more expensive than a year earlier.

As already reported by Valor, the import of fertilizers is at the base of the commercial relationship between Brazil and Russia. In 2021, Brazil imported 3.6 million tonnes of Russian potassium chloride ($1.3 billion). Another $1.2 billion was spent on the purchase of urea (1.3 million tonnes), ammonium nitrate (1.4 million tonnes), nitrogen, phosphorus and potassium (967,000), according to data from Comex Stat, database maintained by the Economy Ministry.

Brazil also imports agricultural products such as malt (157,300 tonnes) from Russia. The volume of wheat is small (28,000 tonnes), because in this case the bulk of purchases come from Argentina.

On the other hand, imports of products from Ukraine are not very relevant. Among the agricultural items imported by Brazil, the list contains cigarettes, frozen fruits and oats, with deals of $2 million last year.

Brazilian exports to both countries are based on agricultural products. For Ukraine, the relevance is also small. Sales are led by peanuts, with 22,200 tonnes for $29.2 million in 2021. The beef industry exported 4,600 tonnes last year, 13% more than the previous year. The values advanced 34% compared to 2020, to $15.4 million.

Sugar, soluble coffee, soy, tobacco, beef tripe, pepper and chicken meat are also on the list. In all, the sale of agricultural products to Ukraine amounted to $148.2 million in 2021.

Shipments to Russia are more significant. They include 768,200 tonnes of soybeans in 2021, or $343.2 million. The commodity is the main product exported to the Russians. Among the proteins, the highlight is the chicken meat. Last year, 105,800 tonnes were shipped, or $167.1 million.

The basket of main Brazilian agribusiness products exported to Russia also includes coffee, peanuts and sugar. Beef comes next, with 35,300 tonnes sold and revenues of $137.6 million. Brazil also resumed exporting pork (9,200 tonnes), after spending 2020 without exports, and 458 tonnes of horse meat were also shipped to Russia in 2021. Revenue from shipments exceeded $1.2 million.

Source: Valor International

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NOOA expands plant, seeks new markets in agribusiness

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NOOA Science and Agricultural Technology will invest R$42 million to expand the capacity of its bio-inputs factory, located in Patos de Minas (state of Minas Gerais). Founded in 2016, the company has already invested R$100 million in research and currently delivers biological solutions for the cultivation of corn but intends to launch biological solutions for other crops as well.

According to Claudio Nasser, president of the company, the purpose of NOAA’s innovations is to rebalance the ecosystem of crops, a primary step for the improvement of Brazilian agriculture, he says. “It is important to bring back [to crops] some microorganisms so that we can reduce the use of pesticides that no longer do the same control as before,” he explains.

Son of an executive that worked for Sementes Agroceres in the 1960s and 1970s, Mr. Nasser has breathed the air of agribusiness since he was a child. Today, he holds 50% of NOOA, among other family-controlled businesses. Of the total investment in the expansion, 70% will be made with its own capital and the rest with loans.

After the expansion is concluded in June this year, the company plans to substitute part of the volume of products delivered today by suppliers.

One of the company’s bets is a bacterium that helps corn to survive the “veranicos” (periods of 15 to 30 days of intense heat and lack of rain). “It is the great innovation we have brought so far,” says Mr. Nasser.

The solution does not solve the prolonged drought, he points out, but if there are normal rainfall regimes and a 30-day window of drought, the bacteria helps to prevent productivity losses. “Soil is important to maintain productivity and so is keeping soils from becoming desertified,” he says

Brazilian Agricultural Research Corporation (Embrapa), which is a NOAA partner, isolated the Bacillus aryabhattai bacterium from research with cacti from the Agreste region, in the Northeast of the country. The microorganism helps plants to root up to 2.5 meters deep into the soil (the common is between 30 and 40 cm) in search of water and nutrients.

“Our research indicates that it will be useful in other crops as well,” continues Mr. Nasser, reminding that, despite the years of research and solutions developed, “no one can work miracles.” The role of the farmer, increasingly receptive to biological solutions, is fundamental for the effectiveness of product application and the timely progress of the crops.

Source: Valor International

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