Next month, Brazil will start exporting the 2013/2014 crop. Still, commodities’ prices and oil and oil products’ imports should impact upon agricultural sector performance in 2014.
Marcos Carrieri*
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São Paulo – Low commodities prices and higher oil imports are the main reasons for the poor performance of the Brazilian trade balance in January and February. The combined deficit in these two months stood at US$ 6.1 billion, up 15% from a US$ 5.3 billion deficit in the first two months of 2013, during which Petrobras expenditures dating from 2012 drove up imported volume figures.
The former Foreign Trade secretary of the Brazilian Ministry of Development, Industry and Foreign Trade, and partner of consulting firm Barral M. Jorge Consultores Associados, Welber Barral says Brazil has not begun exporting the 2013/2014 agricultural crop, which should only take place in April. From that month onward, Brazil’s export performance should improve.
“The trade balance was expected to behave this way early on in the year. The crop has not started being shipped out yet. The results will likely improve as soon as the shipping begins, in April. Nonetheless, export revenues will hinge on commodities prices,” said Barral.
The chairman of the Brazilian Foreign Trade Association (AEB, in the Portuguese acronym), José Augusto de Castro, has said bearish commodities’ prices for the past few years and bullish imports of oil and oil products have contributed to the trade balance performance.
According to Castro, soy prices were on a downward curve, but future contracts for the item are already being traded for higher values. Coffee is up 70% and sugar is up 20% on the future market. Iron ore prices are expected to decline.
As per a survey from the Centre for Advanced Studies on Applied Economics of the University of São Paulo (CEPEA-USP), soy was listed for US$ 29.94 in February and dropped to US$ 28.87 in February this year. On the São Paulo Futures and Commodities Exchange (BM&F), the 60-kilogram bag of soy is being traded for US$ 31.30 for May. Coffee was selling for US$ 142.6 in February 2013, as against US$ 190.58 in February this year, as per CEPEA figures. The 60-kg bag is selling for US$ 243 for contracts maturing in September, according to BM&F figures.
Forecasts
Castro also said it is early to make forecasts concerning trade balance results by the end of the year. “Theoretically, it tends towards deficit, but it is too soon to tell. There are good and bad news, and the market fluctuates a lot based on them. This month, for instance, commodities’ prices are on the way up. Last year, however, seven oil rigs were exported from Brazil, amounting to US$ 7 billion. This year, only two rigs will be shipped abroad,” he said.
Last year, the government’s export figures included rigs made in the country, resold to foreign countries, and rented out by Petrobras to be operated in Brazil.
Barral noted that although the early-year deficit was expected, it represents Brazil’s economic conjuncture of the past few years. “Some of the causes for this performance are declining commodities prices, rising imports outpacing exports, and the weight of petroleum, which is a very strong factor. The country’s has imported a much higher amount of oil and oil products,” he said.
*Translated by Gabriel Pomerancblum
