Growth in global demand for Brazilian farm products has been robust to slowdowns

15 Nov 2012 by Jim Fickett.

As mentioned previously, agriculture in Brazil might be an attractive area for global investors (Brazil, state-sponsored companies, and food). Farming in Brazil is widely considered a growth industry, but a rational investor will want to look beyond the fashions for evidence that past growth is sustainable. Brazil produces a surplus of food, and is a major exporter, so one important question is the strength of global demand.

Below is a graph of Brazilian exports of farm products (all types of unprocessed food), over the last 15 years.

What I find most striking in this graph is that the global recession produced only a relatively small decrease in exports, after which growth very quickly took the total beyond the pre-recession highs. Similarly, the global slowdown that we have experienced most recently, which caused serious drops in global demand for some commodities, has not caused any significant drop in food exports. It seems, then, that growth in global demand for Brazilian farm exports is quite robust.

The future is always another question, however I think that even if the trend towards more expensive food consumption in a growing middle class weakens, population growth is likely to make up for it. On the whole then, continued strong demand seems very likely.

Data footnotes

Data are from the Aliceweb2 interface to the SISCOMEX customs database. Unprocessed food is specified as categories 01 to 15 of the international Harmonized system (HS) for coding trade products. There seems to be no functioning category for “all exports”, so I approximated the total by querying separately for exports to “developed” and “developing” countries, and summing. To smooth seasonal variation, a 12-month running average is used, so the first data point in the above graph covers exports from Feb 1997 to Jan 1998. SISCOMEX uses US dollars as the common currency; I have used the US CPI to convert nominal to real dollars (doubtless there is somewhere a more appropriate price index, but all that is needed here is the rough overall trend, so the CPI is good enough). Older data is continually revised, but only by small amounts. As new data comes out I will update the most recent few months with new revisions, but will not revise older data, because Aliceweb2 is not fully functional, and a fair amount of manual labor is involved.