Recent geopolitical conflicts have exposed a defining feature of the new global order: commodities are back at the center of global attention. For Brazil, that creates a major opportunity, according to Marcos Jank, a professor and head of Insper Agro Global.
For decades, abundant supplies of raw materials helped keep commodity markets undervalued. Since 2020, however, countries have become far more intent on securing control over them, Jank said. The shift goes beyond agriculture and the push for food security. It also includes minerals and energy.
“Commodities have become extremely valuable, because of both geopolitics and new technologies. They are now highly strategic,” Jank said in an interview with The AgriBiz. “Brazil is very well positioned. We are the most competitive country in several commodities.”
Jank will discuss the opportunities and risks amid a changing world at Harvesting Innovation, an event hosted by SP Ventures in São Paulo next Monday, June 22.
Brazil’s past may offer clues for how it should position itself now. Jank said the country’s success in commodities can be traced back to state policies from the 1970s.
Embrapa, which helped push agriculture into the Cerrado, and Proálcool, the bioenergy program, were highly successful initiatives. They helped turn Brazil into a leader in some of the world’s largest raw-material markets, including soybeans and sugar.
“We need to begin a process of strategic planning,” Jank said. Part of the task is to reduce the sector’s vulnerabilities, from Brazil’s heavy reliance on imported fertilizers to persistent infrastructure bottlenecks.
“But that is not the whole story. We are also vulnerable because we depend too much on China and because our export basket is concentrated in too few commodities. Our exports are concentrated in 10 agro-industrial chains. We should be thinking about that.”
Strategic planning, in this context, should include building new markets abroad, including for biofuels. “The bioenergy program was a remarkable success, but it always had a domestic focus. Now we should look to internationalize it,” he said.
Another challenge is to capture more value from agricultural production. That does not necessarily mean building strong consumer brands on supermarket shelves. “There are many opportunities to add value and reduce risks. There are several chains we still have not been able to develop, such as fish and dairy,” Jank said.
Brazil also needs to diversify its export destinations, particularly to reduce its reliance on China, which has been stepping up efforts to strengthen food security. One example is China’s use of safeguards in the beef market, a measure that will affect Brazilian exports in the second half. The Asian country accounts for about half of Brazil’s beef exports.
“We are very exposed. Almost half of everything Brazil produces, measured in calories, goes to export markets,” Jank said. That share has risen sharply in recent years, largely because of Chinese demand. In the early 2000s, Brazil exported 30% to 35% of its production. Today, the figure is 45%.
Perfect Storm
Brazil’s heavy exposure to foreign markets has become more challenging in a world in flux, especially without arbitration by international organizations. That is one of the issues facing the country’s farmers and agribusiness companies. “We have been talking about a perfect storm for some time, but I think it has finally arrived.”
Jank pointed to several other pressures on the sector: higher fertilizer costs, weaker selling prices and a sharp deterioration in terms of trade; high interest rates; elevated leverage; currency risk, as the real strengthens; and growing climate risk linked to the super El Niño. “It is a perfect storm in which you cannot see the horizon.”
A recovery, he said, will depend on a rebound in grain prices. “The question is: When will supply and demand become imbalanced enough to justify higher prices? For now, we are still working in the dark.”
This story was translated with the assistance of artificial intelligence.
