The variation of the dollar plays a fundamental role in the Brazilian economy, especially in the agricultural sector. The costs of the new harvest and the drop in commodity prices are challenging Brazilian producers in the current scenario. The variation of the dollar plays a crucial role in determining profitability and competitiveness in the global market. Producers need to be aware of these market variables and seek strategies to manage risks and face economic challenges.
According to the Focus Bulletin, projections indicate that the dollar will end 2023 at R$5.00, rising to R$5.05 in 2024 and reaching R$5.10 in 2025. These forecasts have a direct impact on several sectors of the Brazilian economy .
According to Enrico Manzi, country manager at Biond Agro. The variation in the dollar affects the agricultural sector on two main fronts: expenses and revenue. Inputs used in agriculture, such as imported fertilizers, are priced in dollars. When it is high, production costs increase, affecting producers' profitability.
The impact of the dollar on the export of Brazilian agricultural commodities
Furthermore, agricultural commodities, such as soybeans and corn, are valued in the US currency, which means that a strong dollar can increase producers' income. The price influences commodity exports. The Chicago Stock Exchange initially determines the price of crops and adjusts it based on supply, demand and seasonality. The exchange rate plays a crucial role in converting these prices from dollars to reais. A higher exchange rate makes Brazilian products more competitive in terms of price on the global market, while a weaker exchange rate has the opposite effect.
The main buyers of Brazilian agricultural commodities include China, Iran, Spain, Japan and Egypt. Brazil's position as the largest global exporter of soybeans and corn highlights the importance of exports for the country's economy. Companies in the sector mainly conduct the export process, helping producers understand market variables, such as the dollar.
In addition to exchange rates, other factors that affect producers include interest rates, inflation, GDP, geopolitical issues and foreign relations. High interest rates can limit access to credit and affect profitability. Higher inflation increases production costs, while stagnant GDP in purchasing countries can reduce purchasing power and limit consumption.
Source: Aline Merladete | agrolink
