The National Supply Company (Conab) is studying the acquisition of processed and packaged rice on the international market to avoid a rise in cereal prices on the domestic market.
The initiative was announced by the Minister of Agriculture and Livestock, Carlos Fávaro, this Tuesday (7), due to the calamity situation faced by Rio Grande do Sul, the state responsible for 70% of national rice production.
The fear of the Ministry of Agriculture and Livestock (Mapa) is that crop losses and logistical transport problems will impact prices and shortages in the domestic market. In this context, Mapa is preparing a provisional measure to authorize the purchase of up to 1 million tons of rice awaiting approval from the National Congress, after recognition of the public calamity in Rio Grande do Sul.
Initially, 200 thousand tons will be purchased from Mercosur, including countries such as Argentina, Uruguay, Paraguay and eventually Bolivia. The remainder will be imported as needed.
What are the rice stocks in Brazil?
External purchases are due to low levels of rice stocks on the domestic market. According to data from Conab, public rice stocks stood at 1.76 thousand tons in 2020. To give you an idea, in 2010 this volume was close to 1 million tons.
The drop is partly due to the fact that Brazil has experienced very low rice harvests since 2016 and also to the decision of the federal government, which has chosen not to replenish stocks.
In this context, the federal government has also been deciding not to purchase products from family farming. In Brazil, there are two modes of acquisition by the government to compose public stocks: purchases from family farming and purchases through Federal Government Acquisition (AGF), through a sales option, which gives the producer the right, but not the obligation, to sell to the government. Since 2016, rice stocks from family farming have remained at zero.
The continuous reduction in the cultivation area since the 2015/16 harvest should contribute to cereal stocks remaining at low levels. Data from Conab show that the area cultivated in the 2022/23 harvest is 23% smaller than that of 2015/16, and should total just over 1.5 million hectares.
The increase in productivity, which in 2023/24 should reach 6,841 kilos per hectare, has contributed to the increase in national production, estimated at 10.56 million tons for the 2023/24 cycle. However, a large part of national production is concentrated in the state of Rio Grande do Sul, which according to Conab projections for April – before the rains – would harvest a harvest of 8.73 million tons.
How are stocks formed?
Public stocks were created for the State to protect farmers and consumers from risks caused by unforeseen events in agricultural activity (rain, drought, frost). However, Conab’s warehouses have a static capacity of just over 1.6 million tons, which represents around 1% of the country’s total storage of rice, beans, corn and soybeans. This capacity is distributed across 64 Storage Units with 126 warehouses.
Stock supply is currently linked to Conab’s Minimum Price Guarantee Policy (PGPM), which provides for the acquisition of food only when the value of the product is below or tends to reach a value lower than the minimum price. public stocks exist, they are practically empty.
The minimum price guarantee policy is an instrument to support rural producers through which the Federal Government defines a minimum reference price for agricultural products, aiming to implement measures that guarantee a minimum profitability of production, not characterizing the imposition price to the market.
The objectives of the minimum price policy are to reduce fluctuations in rural producers’ income, ensuring them a minimum remuneration; the regulation of food supply, encouraging production and ensuring the regularity of the national supply. Despite existing on paper, it has contributed little to the regularity of supply in the domestic market.
