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Brazil in recession, but farming is booming with the 29% fall of the Real

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Brazil in recession, but farming is booming with the 29% fall of the Real

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Financial and political turmoil that have Brazil on the brink of a depression is also contributing to one of the best years ever for domestic farmers. Economic stress and a weak currency has facilitated export revenue for everything from soybeans to beef to coffee.

 Even as global surpluses spark a commodity slump, the drop in the Brazilian Real against the dollar is so steep that farmers still come out ahead. Agriculture revenue will rise to a sixth straight annual record this year and grow again in 2016, the government predicts.

Laranja
Agriculture in Brazil

This positive outlook lives next to Brazil’s mess: a sprawling corruption investigation has caused political gridlock in Brasilia, while the budget deficit is swelling. The economy contracted for three straight quarters, the worst since collection of the data began in 1996. Unemployment is growing, and inflation is accelerating. The longest recession since the 1930s is now mutating into “an outright economic depression,” Goldman Sachs Group Inc. said on December first.

But agriculture, which accounts for 23% of the economy and 40% of exports, is still flourishing. The local currency Real has tumbled 29% so far this year against the dollar. A strong dollar means more Reais for every ton exported. While soybean futures fell 14% this year in the U.S., touching the lowest since 2009, prices in Reais rose 23%.

Brazil has become the world’s largest exporter of soybeans, beef, coffee, sugar and orange juice. With the help of higher domestic prices and export sales, agriculture income will reach a record 487.3 billion Reais ($128 billion) this year and rise 0.2% in 2016 to 488.1 billion Reais, Brazil’s Ministry of Agriculture said in November.

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