Economy

How the conflict between Russia and Ukraine affects Brazilian agriculture

Feb, 24, 2022 Posted by Sylvia Schandert

Week 202208

It is impossible to talk about pros and cons in the face of a war. There are only negative points – and, for Brazilian agribusiness, they multiply with Russia’s invasion of Ukraine.

As an immediate reflection of the conflict, grains raised on the international market. It is true that Brazil is a major exporter of soybeans and corn and could even benefit from higher prices for both — and also from increased demand if Russians and Ukrainians have problems shipping their production — but the country is also one of the biggest wheat importers, the cereal that is rising the most.

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

In common with all agricultural products, fertilizers, which are already much more expensive since last year, will certainly increase even more. With the possibility of expanding sanctions against Russia, one of the main exporters of the input in the world, the scenario for supply 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 plantations. So, if it manages to buy everything it needs on the market this year without Russia — and without Belarus, also an important supplier, which it can no longer sell because of sanctions imposed by the United States and the European Union — the rural producer will have to pay much more for the input.

The balance of this equation, which points to an increase in the prices of basic grains used in human and animal food and of sugar, which is essential even for the poorest population, may be more inflation. The effects on production costs and lower prices of proteins such as chicken and eggs also take into account.

In the specific case of chicken meat, there may be some encouragement if Ukraine is unable to export and more orders flow to Brazil.

Grains

Russia and Ukraine are, respectively, the first and third largest wheat exporting countries in the world, behind only the European Union. So far, the US Department of Agriculture (USDA) estimates that together Russians and Ukrainians would ship 59 million tonnes in this 2021/22 crop, almost a third of the total forecast for the season. 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.

Fertilizers

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

Russian and Ukrainian imports

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 tons of Russian potassium chloride (US$ 1.3 billion). Another US$ 1.2 billion was spent on the purchase of urea (1.3 million tons), ammonium nitrate (1.4 million), nitrogen, phosphorus and potassium (967 thousand), according to data from ComexStat, from the Ministry of Economy.

Brazil also imports agricultural products such as malt (157.3 thousand tonnes) from Russia. The volume of wheat purchases is small (28 thousand tonnes) because, in this case, the biggest supplier is Argentina.

Brazilian imports of products from Ukraine are not very relevant. Among the agricultural items that Brazil buys from Ukraine are cigarettes, frozen fruit and oats, with deals worth US$ 2 million last year.

DataLiner data indicate that 87% of products imported from Russia by Brazil are in bulk and 6.6% in containers. 55% of imports are fertilizer, the main one being Potassium Chloride. Imported volumes grew 53% in 2021 compared to 2020. Check the charts below:

Brazilian imports from Russia in tonnes

Source: DataLiner (click here to request a demo)

Brazilian imports from Russia in TEUs

Source: DataLiner (click here to request a demo)

Main products imported by Brazil from Russia in tonnes

Source: DataLiner (click here to request a demo)

Main products imported by Brazil from Russia in TEUs

Source: DataLiner (click here to request a demo)

In relation to Ukraine, DataLiner data indicate that 55% of imported cargo is in Breakbulk and 20% in container. 85% of imports are steel products. In containers, 63% of what is imported is made of plastic polymers. Check the charts below:

Brazilian imports from Ukraine in tonnes

Source: DataLiner (click here to request a demo)

Brazilian imports from Ukraine in TEUs

Source: DataLiner (click here to request a demo)

Main products imported by Brazil from Ukraine in tonnes

Source: DataLiner (click here to request a demo)

Main products imported by Brazil from Ukraine in TEUs

Source: DataLiner (click here to request a demo)

Exports to Russia and Ukraine

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, or US$ 29.2 million, in 2021. The beef industry exported 4,600 tonnes last year, 13% more than the previous year. Revenue increased 34% from 2020 to $15.4 million.

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

Shipments to Russia are more significant. There were 768.2 thousand tonnes of soybeans in 2021, or US$ 343.2 million – the oilseed is the main product exported to the Russians. Among the proteins, the highlight is the chicken meat. Sales last year totaled 105.8 thousand tonnes, which generated US$ 167.1 million.

The basket of main Brazilian agro products sent to Russia also includes coffee, peanuts and sugar. Beef comes next, with 35,300 tonnes sold and revenues of US$ 137.6 million.

DataLiner data on the volumes exported by Brazil to Russia in the last three years indicate that 72% of the goods are exported in bulk and 27% in containers. The main products exported to Russia are soybeans (40%) and sugar (21%) in bulk.

The main products exported by container in 2021 were peanuts (8,400 tues) and frozen chicken (8,222 tues). Check out the graphics below:

Brazilian exports to Russia in tonnes

Source: DataLiner (click here to request a demo)

Brazilian exports to Russia in TEUs

Source: DataLiner (click here to request a demo)

Main products exported by Brazil to Russia in tonnes

Source: DataLiner (click here to request a demo)

Main products exported by Brazil to Russia in TEUs

Source: DataLiner (click here to request a demo)

In relation to Ukraine, 94% of Brazilian exports to the country are in bulk and 6% in containers. 70% are bulk aluminum cargoes and peanuts are the main exported container product, according to DataLiner data. Follow the data below:

Brazilian exports to Ukraine in tonnes

Source: DataLiner (click here to request a demo)

Brazilian exports to Ukraine in TEUs

Source: DataLiner (click here to request a demo)

Main products exported by Brazil to Ukraine in tonnes

Source: DataLiner (click here to request a demo)

Main products exported by Brazil to Ukraine in TEUs

Source: DataLiner (click here to request a demo)

Source: Valor Econômico

To read the full original article, go to: https://valor.globo.com/agronegocios/noticia/2022/02/24/como-o-conflito-entre-russia-e-ucrania-afeta-o-agro-brasileiro.ghtml

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