Brazil: Climate and exports drive long-term rise in food prices
Changes in climate and land use favoring export crops have slowed the growth of food production in Brazil, contributing to rising food prices. This finding is part of the Ibre Letter, a monthly economic analysis published by the Brazilian Institute of Economics (Ibre) at the Getúlio Vargas Foundation (FGV).
The text, authored by economist Luiz Guilherme Schymura with contributions from other Ibre researchers, highlights the factors driving food inflation to outpace the country’s official inflation, measured by the Broad National Consumer Price Index (IPCA) of the Brazilian government´s statistics agency IBGE.
February's IPCA data showed that inflation in the food and beverages group rose 7.25 percent over 12 months, outpacing the overall index, which increased 4.56 percent. Ibre's Letter highlights this divergence between food inflation and general inflation over a longer period.
The document states that between 2012 and 2024, household food prices increased by 162 percent, while the overall IPCA rose by 109 percent.
Climate and exchange rates
Ibre notes that “the rise in food prices—which weigh more heavily on the consumption basket of the poorest—has been an ongoing global trend for nearly two decades, driven by multiple complex factors.”
Schymura emphasizes that climate change is driving the disconnect between food inflation and the general index. The rise in extreme events and increased meteorological unpredictability “are disrupting the supply of commodities [goods traded at international prices] and food products. This process is affecting multiple regions worldwide, with Brazil being notably impacted.”
The analysis highlights that the negative effects of climate change began to surface clearly in the mid-2000s, with particularly severe impacts in warmer regions, including Brazil.
The document also highlights that the “significant devaluation of the exchange rate” has contributed to rising food prices by boosting exports.
With the real devalued, exporting and earning income in dollars becomes more profitable for producers.
Another consequence of the high exchange rate is the increased cost of imported agricultural inputs, including pesticides, fertilizers, machinery, and equipment.
Another factor highlighted is the domestic policy to stimulate consumption, including the “substantial real increase in the minimum wage and the significant expansion of the Bolsa Família cash transfer program.” With higher incomes, consumer demand tends to rise, putting pressure on the balance between production and supply.
Agricultural production and exports
The FGV publication presents data indicating a slowdown in food supply growth. “Global agricultural production, which grew at an average annual rate of 2.6 percent in the 1990s and 2000s, slowed to 1.9 percent in the 2010s.”
Ibre outlines specific scenarios for Brazil, stating, “Brazil is not producing enough food for its own population and the world.” One contributing factor is the shift in crop production, with food crops being replaced by soy and corn.
“Crop production is growing at a slower pace than needed to meet domestic and international demand for food, particularly for human consumption. A portion of the cultivated land appears to be shifting from food crops to more export-oriented products,” the text states.
Ibre also highlights specific increases in household food prices from 2012 to 2024, including fruit (up 299%), vegetables (246%), cereals, legumes, and oilseeds (217%), and tubers and roots (188%), compared to a general inflation rate of 109 percent.
Cultivated area
The study reveals that the total area planted in Brazil grew from 65.4 million hectares in 2010 to 96.3 million hectares in 2023. However, this expansion is primarily driven by soybeans and corn. Excluding these two export-oriented crops, the planted area remained relatively stable, increasing slightly from 29.1 million hectares in 2010 to 29.3 million in 2023.
According to Ibre, two of the main products in the Brazilians’ diet saw a decline in production per inhabitant. Beans decreased by 20 percent, and rice by 22 percent, when comparing 2024 to 2012.
“The area planted with rice in Brazil dropped from 2.8 million hectares in 2010 to 1.6 million in 2024, underscoring the shift from food crops to export-oriented crops, particularly soybeans and corn,” writes Schymura.
Meat
The analysis also highlights factors driving up meat prices, such as the “beef cycle,” which leads to a reduction in supply approximately every five years.
The growing demand for Brazilian beef from other countries is also a key factor. According to Ibre, exports of the product have surged since 2017, while domestic production has remained relatively stable.
According to the Letter, in 2017, the availability of beef for domestic consumption stood at 39.9 kg/inhabitant. By 2023, this figure had dropped to 36.1 kg, the lowest level since at least 2013.
The analysis also notes that meat production has been impacted by climate change, particularly highlighting the damage to pastures caused by the severe drought in 2021.
Export crops
Regarding export crops, Schymura comments that “it’s not a matter of restricting them.” He explains that soybeans, for example, bring significant benefits to Brazil, such as foreign currency inflows and the “resulting macroeconomic stabilization.” He also highlights that these crops help lower feed costs, which are a key input in animal protein production.
“The focus should be on stimulating additional food production, not hindering other areas of agribusiness. It's not a zero-sum game,” he stated.
Recommendations
The Ibre Letter concludes that “the rise in food prices is not a temporary phenomenon” and recommends policies to ensure food supply and security:
- Focus on crops that directly supply food for Brazilians’ tables;
- Monitor production.;
- Restore public stocks;
- Develop silage (storage structures);
- Create outlets;
- Provide targeted credit.
