Brazil: Dollar exchange rate increase makes agri-inputs more expensive
Apr. 6, 2021
With the products of the winter harvest already acquired and ready to go to the field, the Brazilian producer who has been shopping and planning the next summer harvest (2021-2022) has been surprised by the increase in the price of inputs, especially fertilizers and agrochemicals.
If the devalued Real increased the gains from exports of grains such as corn and soy in dollars, the appreciation of the United States (US) dollar pulled up the prices of inputs, most of which are imported.
“There was a cotton product purchase that scared me. I made a purchase in February for which I paid R$50/liter. A month later it was R$58, increasing nearly 20%. The increases are somewhat repetitive and while there is no generalized increase, it goes up gradually,” observed the producer and president of the Rural Union of Cambará, in the North Pioneer region of Paraná, Aristeu Sakamoto.
The manager's perception reflected in market figures. In the case of agrochemicals, the devaluation of the exchange rate was responsible for the rise on the shelves. In general, the pesticide market showed a drop in cost of the dollar to 16%, but, in reality, it is an increase in the house of 15% to 20%.
The drop in the price of these products in dollars is explained by some factors. In 2020, inventories were a little high, in addition to strong domestic competition and the entry of new players in this market. Last year alone, 493 new products were registered in Brazil, which ended up restricting and limiting price adjustments in dollars.
When analyzing the data from Paraná's production collected through the Campo Futuro Project, of the Confederation of Agriculture and Livestock of Brazil (CNA), it is possible to notice a certain decrease in the cost of pesticides. In the region of Guarapuava, Center-South, the sum of expenses with herbicides, insecticides and fungicides in a modal soybean property was R$900.70 per hectare in January 2021. The cost of the same products in the same month of 2020 was R$916.45.
Despite the increase in the price of fertilizers and agrochemicals, the exchange ratio for soybean and corn bags is very favorable for the farmer. According to Campo Futuro, today the ratio is around 28 bags of corn per ton of KCl (potassium chloride) and 31.5 bags per ton of urea. For comparison, in January 2020, this ratio was around 45 and 42 bags, respectively.
On the agrochemical side, the bill is also good for those who produce. In January of this year, the exchange ratio for glyphosate, one of the most widely used herbicides in crops in Paraná, was 0.23 bags of corn per unit of the product. In January 2020, this ratio was 0.36 bags per unit. Likewise, insecticides such as cypermethrin and thiamethoxam, which were exchanged in the proportion of 1.14 and 11.15 bags of cereal per unit of the product in early 2020, are now exchanged for half this amount, 0.51 and 5.44 bags per unit, respectively.
“The price of corn has gone up a lot, and I believe a little more than the inputs. But we know that when corn and soybean increase, they tend to stabilize and already fall in price. But the inputs go up and prices do not fall at the same speed,” observed Nelson Paludo, a producer in Toledo.
According to him, the producer must know the numbers in his business. “The strategy is to always check how many bags of soybeans you need to pay for the cost per hectare. So, the producer needs to be aware of the possibilities of making a good exchange of the input for the product of the sale. The administration of a property is done with results. And to have a result, you have to sell well and buy well,” Paludo said in conclusion.
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