Brazil’s Changing Macroeconomic Conditions: Impacts on Agriculture

Brazil has attained remarkable economic progress over the past decade with parallel modernization and expansion of its agricultural sector. With continuing productivity increases and the availability of additional land suitable for farming, further growth in agricultural production and exports has become the norm. However, current domestic macroeconomic challenges, including slow income growth, a depreciating Real, and administered prices to control inflation, are further challenged by adverse external events, including the substantial depreciation of China’s currency on prospects for soybean and beef exports. This confluence of domestic and foreign economic challenges will negatively impact the agricultural sector’s ability to continue the pace of its projected growth and may significantly slow export expansion. If that should happen, world food prices may rise unless other world market suppliers such as the United States can fill the deficit. We evaluate the impact of these new developments and associated challenges on Brazil’s agricultural sector and examine the response of production, trade, and market prices to changes in Brazil’s macroeconomic situation.