Of every ten rice dishes consumed by Brazilians, seven come from Rio Grande do Sul. The country only escaped a widespread shortage of this commodity because most of the Rio Grande do Sul harvest was already harvested last week, when the rain disaster broke out, floods and floods.
Of the rice that was in the Rio Grande do Sul fields, between 17% and 20% of production, it is likely that little will be saved when the waters recede, given that the remaining plantations are precisely in the central region of the state, the most affected. The crop failure in the largest producing state occurs at a time when global supply is already scarce, and projections are that the cereal could reach record prices on the domestic market in the coming months, forcing the country to rely more heavily on imports.
“If the floods had occurred a month ago, we would certainly have lost 50% of the national rice harvest. And the product would become a dish for the rich, because we have nowhere to buy it”, says Vlamir Brandalizze, agricultural commodities consultant in Curitiba (PR).
Rice is also expensive in other countries
The losses in Rio Grande do Sul coincide with crop failures in other rice growing regions on the planet. India, the world’s largest exporter, also faced floods and banned shipments to ensure its own food security. Neighboring Mercosur countries, as well as China, also harvested less due to excessive rainfall. Brandalizze reports that he was with a rice producer in Paraguay last week who reported having already sold 70% of his production. And the other 30% was reserved to sell at the best price, which must be offered by Europeans.
With the need to look for rice even in Asia, as happened last year, the forecast is that the price of the cereal in the Brazilian market will reach a new historical record. “Last year, for the first time, rice exceeded the value of a sack of soybeans. And this year it should be above soybeans. The consumer will pay more, between R$30 and R$50 for a 5-kilo package”, predicts Brandalizze.
Even so, he emphasizes, rice is still a basic and relatively low-cost food. “For a family, you need two packages for the entire month, with everyone eating well”, she points out. The good news is that the bean harvest is coming full, and there has already been a drop of up to 40% in prices in recent weeks. The solution will be “to put more beans on the plate”, advises Brandalizze.
Brazil consumes almost 11 million tons of rice
To meet domestic demand, Brazil will need to import between 3 and 4 million tons of rice. Without much offer from Mercosur partners, the solution will be to appeal to the United States, Thailand and Vietnam. Evandro Oliveira, an analyst at the Safras e Mercado agency, recalls that the country has already entered this cycle with the lowest stocks in 20 years, less than 500 thousand tons, only enough for one month’s supply.
“The biggest challenge of the season will be at the buying end. There are industries that have zero stock, especially small and medium-sized retailers. When there is a shortage of rice, we have to go to Asia, if necessary, at whatever price,” observes Oliveira.
The industry, however, eliminates any risk of shortages. “Despite the losses, we are confident in saying that Brazil is fully capable of guaranteeing its supply. It is likely that, given the current circumstances, exports will lose a lot of space and there will be an increase in imports. The volume of imported rice should somewhat compensate for this crop reduction”, points out Tiago Barata, executive director of the Rio Grande do Sul Rice Industry Union (SindArroz).
There has not yet been time to assess the size of the damage.
What we hear most from experts from different agricultural sectors is that there will be some inflationary pressure, but “it is still early” to have a real dimension of the losses, both in rice and in other production chains in which Rio Grande do Sul has a large weight in the Brazilian economy, such as soybeans, corn, milk, pork and poultry.
“Brazil is an extremely large country, and a crop failure in the South will not necessarily result in an immediate increase in prices. Sometimes it takes a while, sometimes the offer that we no longer have in the South comes from other places in the country. It’s still early, there wasn’t time to do the math to know the size of this loss”, says André Braz, coordinator of FGV-Ibre’s Price Indices.
Braz does not see a drastic effect on inflation in the short term. “The first impact is in Porto Alegre, and, subsequently, due to the losses that the harvest may present in Rio Grande do Sul, we will be aware of the national effect”, he adds.
If the cascade effect for the rest of the Brazilian economy still appears to be contained, the same cannot be said about the local and regional impact. The Brazilian Animal Protein Association (ABPA) points out that ten poultry and pork production units are paralyzed in Rio Grande do Sul or “experiencing extreme difficulties in operating, due to the impossibility of processing inputs or transporting employees”. The state accounts for 11% of national chicken production and 19.8% of pork production, destined for consumption on local shelves and for export.
Fear of local shortages in the coming weeks
The unviability of some production centers raises an alarm in the poultry and swine sector. “There is fear that, in addition to the problems already experienced today, the population of Rio Grande do Sul will face a shortage of products until the production system resumes – which could take more than 30 days”, says a note from ABPA.
It will be necessary to wait for the water to recede to find out how quickly the state’s infrastructure can be restored, moving from a situation of collapse to a level of minimum stabilization, which allows for some normality to be brought to the logistics of distributing goods, products and services. The dairy sector has little room for waiting; In many locations in the Taquari Valley, without electricity, water and feed, the livestock farmers’ alternative has been to discard the milk or not even milk it.
In soybeans, there are still around 4 million tons to be harvested in Rio Grande do Sul, and losses on this amount are estimated at 15% to 25% by the consultancy Datagro. In the country, 95% of the crop has already been harvested, which should mitigate an upward impact. As for corn, also according to Datagro, the loss would be 2% to 4%, with no weight to influence other markets.
In the beef sector, the market has not yet been affected by the effect of the rains. “The price changes we captured have nothing to do with any type of shortage due to logistics problems in Rio Grande do Sul. We are monitoring, but today it did not affect meat and grain prices at all”, he says. Alcides Torres, analyst at Scot Consultoria. “There is a lot of speculation regarding corn, soybeans and especially rice. But for now, it’s too early to say anything,” he concludes.
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