Food inflation threatens Brazil’s rise to agricultural superpower

By Caroline Stauffer and Silvio Cascione  /  Reuters, SALTO, Brazil

Sun, May 05, 2013 - Page 14

Brazil, an up-and-coming agricultural superpower with abundant fertile land, is struggling to provide consistently affordable food for its population. To understand how, consider the tomato.

Prices of the red fruit shot up 122 percent in March from a year earlier, putting it on the cover of two national magazines, spurring reports of tomato trafficking from Argentina and igniting national outrage over how produce could possibly cost more in the tropics than in, say, Alaska.

Brazil’s output of export commodity crops like soybeans, corn, sugar and coffee is growing faster than anywhere in the world, and no one is warning of an imminent food shortage in a country so rich in natural resources.

However, Latin America’s largest economy is increasingly becoming a tale of two contrasting agriculture policies: Export crops are a model of technological prowess and high yields, while the farms responsible for feeding a growing consumer class are mostly small and family-run.

Weighed down by debt, vulnerable to weather damage and squeezed out of their lands by the commodity crops, these farms are the first link in a long chain of inefficiencies that made food prices soar in a country still scarred by its long history of high inflation, complicating Brazilian President Dilma Rousseff’s economic revival.

“Brazil is only concerned about the agriculture that affects our trade balance,” said Cyro Cury, who grows tomatoes on a farm outside Sao Paulo. “There is no strategy, no regional statistics. We don’t deserve to be called the world’s bread basket, we don’t have the right policies for that.”

Some of the problems facing the small farms clustered around Brazil’s largest cities, such as scarce labor and poor transport lines, are also felt by manufacturers and entrepreneurs. They make up part of the so-called “Brazil cost” that has choked economic growth and made doing business so expensive.

The Brazilian government largely blames the recent rise in tomato, onion and carrot prices — which helped drive inflation above the Central Bank of Brazil’s target range in March for the first time in a year-and-a-half — on seasonal factors it cannot control.

“There were climate problems in some regions,” Brazilian Secretary of Agriculture Policy Neri Geller said. “We have well-defined policies for these products through credit lines and intervention through minimum prices.”

However, there is a growing consensus among farmers and economists that deeper structural issues leave Brazil vulnerable to oscillating food prices at a time when few comparable countries are worried about inflation.

Food accounts for 22 percent of Brazil’s consumer price index, and fresh fruits and vegetables are widely consumed by all classes.

Chief among the factors spurring high food prices is a lack of farm workers in a country now enjoying almost full employment. After years of strong growth, services companies have lured unskilled workers away from farms by offering them better perks and a lighter workload.

Unlike the large soy and sugar plantations that are largely mechanized and often run by foreign firms, about 60 percent of Brazil’s vegetable farms are still family-run and rely on manual labor.

Cury said the scarcity of tomatoes and record prices this season are mainly due to an outbreak of a deadly fungus, fewer seeds planted as farmers emerge from debt and the difficulty of finding workers. He said he wanted to plant more tomatoes to help meet surging demand in Sao Paulo, but he could not find the additional workers for a monthly salary of about 1,000 reais (US$500).

Brazil is the world’s top producer of sugar, citrus and coffee, the No. 1 exporter of poultry and beef and is on the verge of becoming the leading soybean grower, but land for non-export crops is increasingly scarce.

Data from statistics agency IBGE show that the area planted with rice and beans — staples of the national diet — has fallen about 30 percent since 1990, when the population was 25 percent smaller.

Cury and other farmers cannot move too far from the cities in search of cheaper land and labor in the interior like their soy and corn farming counterparts because vegetables would spoil long before they arrived.

Though tomato prices in Brazilian grocery stores have fallen slightly since March, when they cost more than in supermarkets in northern Alaska at US$8 per kilogram, onion prices remain about US$3 per kilogram, double their price in Mexico City and three times what they cost in Lima, Peru.

Though tomato producers welcomed this year’s boon of higher prices, Cury said it is not making them rich because of the large gap between wholesale and consumer prices. A box of Cury’s tomatoes costs 3.5 reais, but was selling for four times that amount at a local supermarket, he said.

He said the small profits limits farmers’ ability to increase food output, ensuring high prices for years to come if nothing changes.