AgriBrasilis exclusive interview with Roberto Rodrigues about agribusiness’ main features and outlook
Roberto Rodrigues, former Minister of Agriculture (2003-2006), graduated agronomist from USP, and professor at FGV shares his point of view about the current agribusiness scenario in the country, traces a background of the technification of agriculture in Brazil and a perspective of the future of food production in order to feed the world.
AgriBrasilis – In the last decades, Brazil has achieved a prominent and fundamental position in global agribusiness scenario. What were the factors that led to that?
Roberto Rodrigues – I believe that this fact was due to three internal factors and one external factor. The first internal factor is technology. Over the past 30 years, Brazil has incorporated many innovative technologies. Collor Plan started to stabilize economy, also Real Plan in 1994 ended the vicious financial circle. So many farmers begun to have the conditions to technify their farms. From Collor Plan (1990) until this year, the planted area with grains in Brazil has grown 74%. Whereas yield has grown 346%. What does that mean? Higher yield per hectare. Currently we cultivate 66 million hectares, if we consider two crops per year. If we had today the same productivity per hectare that we had 30 years ago, we would need to plant another 103 million hectares to harvest the equivalent of this year. That is to say that we preserve 103 million hectares, that indeed our technology is sustainable.
The second factor is the available land. According to EMBRAPA’s survey, Brazil has 66% of its territory still covered with native vegetation and only 9% of it is cultivated with all the crops from lettuce to eucalyptus. Pastures occupy an additional 21%, so the sum of all agricultural activities performed in Brazil represents 30%. Despite that, many technologies were developed in area of livestock and pastures, and today it is possible to produce much more meat per hectare. In addition, extensive pasture areas are falling into disuse, nowadays many crops are cultivated in former pasture areas. Therefore, the planted area is still small when compared to other countries.
The third factor is people prepared for the job.
An interesting thing is that Brazil has many young people joining all links in the agricultural production chain.
Agriculture has been evolving with new technologies, especially in the area of connectivity, for which youth are skilled. This gives us a great advantage over other developed countries, where average age of people linked to agriculture is higher, because youth doesn’t want to stay in the countryside.
The external factor relates to foreign markets, mainly Asian countries. In the year 2000 the agribusiness GDP was US$ 21 Bn, last year we exported US$100 Bn, that is almost 5 times more. 2.7% of the US$ 21 Bn in 2000 went to China. Last year, of US$100 Bn, 36% to China. We mention China, but many Asian and Middle East countries had greater population growth than that of developed countries, and per capita income also grew more due to the people entering the universe of work. Thus the demand growth for food in these emerging countries was extraordinary, and Brazil was able to meet this demand in a complementary way.
AgriBrasilis – Despite the successive harvest records, what do you think is necessary to the best development of Brazilian agribusiness?
Roberto Rodrigues – The UN Carried out a study in 2001 about how the world would be like in 2050, relating the population growth to food supply. This study was criticized because looking 50 years ahead is reckless. The technological factor alone grows very fast and wide, inhibiting any expectation greater than 10 years. Besides, what can we foresee about public health and population growth really? This pandemic has shown a great uncertainty about the world’s population within 50 years.
After that, it was created an OCDE study in partnership with FAO, and later the USDA also associated with them, that shows a World perspective in 10 years, with data yearly review. It says that 10 years from now, so no one is short of food it is necessary to increase food production by 20%, and for that Brazil would have to grow it’s production in 40%. Thus we see that a very high demand is placed on Brazil to the future. What shall we do to meet this demand? Develop an integrated strategy, with 4 essential topics:
In the first place, an income policy to farmers, as Brazil is the only country that doesn’t have a defined policy for the sector, mainly agricultural insurance. Currently only 15% of arable land is insured. Too little. Any developed country nowadays has its agriculture insurance very well defined. Second, related to the income policy is secured credit for farmers, but for farmers to have credit it is fundamental that they have insurance. Another element within this matter is technology, it is indispensable for farmers to have technology in the field to reduce risks and increase the insurance guarantee. Finally, guaranteed-minimum prices should work when there is an insurance claim to cover. These are the 4 fundamental elements to stablish a well-defined agricultural income policy.
The second topic is Logistics and Infrastructure. Until the 1970’s Brazilian agriculture was near to the main capitals and ports. In the 1970’s the productive potential of Cerrado (Brazilian savannah) was discovered, from then on agriculture started to migrate largely to this region. Problem is that infrastructure and logistics didn’t follow this migration, and that is a major obstacle for Brazil to remain competitive in the production and distribution of food. Among the modes of transportation in Brazil, only 15% are rail. In other countries that compete with our agriculture this exceeds 40%, such as the USA, Australia and Canada.
The third point is diplomacy that brings results. Currently, around 40% of food international trade is made through bilateral agreements or between groups of countries. This is done to enhance trade and wealth among them. Brazil doesn’t have many relevant bilateral agreements. There is an agreement between Mercosur and European Union, which is very important, but is at risk of rupture due to environmental issues. If it is broken, agriculture in Brazil will be greatly affected. We need a much more proactive and multilateral diplomatic work so we can sign more trade agreements.
Fourth point, is technology. In Brazil there are several research and technology centers such as IAC and EMBRAPA that were of great support for development in the 1960’s, 1970’s and 1980’s, and now they are in risk for the lack of investments. The more demand and competition grow, the more the need for technology investment increases.
Another point is the need to end illegalities, such as deforestation, arson, land invasions, mining and land grabbing. We need more severity in the laws that monitor these activities so that we could communicate properly with foreign nations, because everybody sees what we do here, and that has a big impact on national diplomacy.
Brazil performs one of the most sustainable agriculture on the planet, but this concept falls apart as long as illegal deforestation exists in Amazon Forest. As long as this happens, we will lose market share.
AgriBrasilis – In addition to soy, corn, coffee, sugar cane, orange, what other crops do you believe Brazil has the potential to stand out in the coming years?
Roberto Rodrigues – We are the largest producer of many crops, some you already mentioned. Brazil only produces 3% of world’s fruits, we are ranked 27th in this market. We can grow spectacularly in fruit. Chile exports more fruits than Brazil, and we are a much bigger country, with far more vegetation and a more favorable climate. Another product that has great productive potential in Brazil is aquaculture. We have an extensive ichthyologial fauna, water abundance, large coast, and yet Brazil contributes with only 1% of the world’s production. Milk has also a great potential, we contribute with only 2% of world’s production.
Brazil can also explore further the organic market, which includes the whole chain, but still suffers due to the lack of incentive programs. It’s a pity because the consumer market is growing a lot, and requires a lot of varieties.
We can mention other less representative crops that have potential, such as peanuts, a native plant that has negligible production in the country. It is grown mainly in areas of sugarcane renewal, but it could be a highly productive single crop for various purposes such as feed production. There is a potential for nuts too, both national and exotic ones, with large consumer market.
AgriBrasilis- Brazil is still a major producer and exporter of low added value commodities. Is there room, technology and resources to also be an exporter of agricultural goods with higher added value?
Roberto Rodrigues-This is a delicate issue as it concerns international trade, regulated by World Trade Organization (WTO) in what is called tariff escalation and peak tariffs. Rich countries protect themselves with tariff escalation because commodities have no tariffs, but once it is added value to it, there is a corresponding tariff. An example of this is Brazilian exported coffee. Presently we are the largest producer of coffee beans in the world, however we have a share of less than 3% of the roasted and grounded coffee. To solve the issue it isn’t enough just to roast and grind coffee. If there isn’t an economic agreement that reduces escalation and peak tariffs for roasted and grounded coffee, the product won’t arrive at the port.
This issue is connected to what I’ve said before about diplomacy. There must be a more rigorous commercial diplomacy than now, in order to move forward in this issue coherently. If that happens, then is need to develop industries and marketing to process and sell the coffee. Therefore, it is not as simple as it might seem to be.
AgriBrasilis-The US – China trade war tends to continue even with the new Biden government, now more diplomatically. How can this affect Brazilian agribusiness and what are the challenges?
Roberto Rodrigues- President Biden is a multilateralist politician, tending to make relations with the whole world more flexible, not only with China. He has already said that will join The Paris Agreement, WTO and WHO again, and introduce his causes on global scenario in a more consistent way. The US-China situation is not only a trade war, it is a bigger scenario of diplomatic crisis that president Trump has caused, and despite Biden’s flexibilization trend, it won’t be simple. In this trade war, many agriculture producers were harmed and still need government subsidies to compensate market losses. The new president will face a great challenge restructuring this whole scheme.
Brazil was relatively benefited from this trade war between the two powers because we gained the market that the US lost and we are selling many more products to China. However, Biden’s election generates signs of reestablishing communication between USA and China, which could in the future become a new major trade agreement. In that case, Brazil could be harmed.
India for example is growing, expectations are that it’s population will be larger than that of China in 20 years, more than 1.4 billion people highly demanding of food. Also India is over protective in relation to its farmers, they will need to import a great amount of food. Thus, we need more diplomacy to sign more bilateral agreements and don’t lose markets.
AgriBrasilis – How do you see the Brazilian agribusiness post-pandemic?
Roberto Rodrigues – In my point of view the pandemic has brought up two central questions to the very short-term future. Food security and sustainability. Food security is a concept that emerged in post-war Europe, as many countries went through famine during World War II. After that, governments came together and created a series of subsidies so that Europeans no longer suffer from the lack of food. Why were they worried about food security? Because it is the only way to ensure Peace.
A hungry man is an angry man, a man whose children starve is a revolutionary, and millions of men whose children starve create a huge revolution that could bring down a government.
The pandemic brought this concept back, we saw countries closing their borders and reducing food exports to ensure maximum food for domestic consumption and avoid any tensions. The trend is for countries to create neo-protectionist food security measures, and reduction of food imports and exports that might harm Brazil. Ergo it is important that we are aware of the scenarios that will be designed from now on and that we participate in designing them, to keep holding our competitiveness and markets.
The other concept that took on a new dimension with the emergence of the pandemic is sustainability. Young people around the world are connected to this and want to take care of the environment. What are the implications of that? This concept will be more present 40 years from now, when these young people are ruling countries and tightening environmental laws. That means that sustainability, which is a lever to environmental issues has gained a new conceptual strength around the world. I think that in the future we will have much more work than we had until now, as markets will be more restrict and will create more protectionist rules, including sustainability.
I still see Brazil as a great potential as long as it has this sustainability strategy, so that we will be able to guarantee markets for us and for everyone in the future.