Agri-food globalization and food security in Brazil: recent trends and contradictions

The restructuring of Brazilian trade in the period 2000–2020

The dynamic global economy at the beginning of the twenty-first century propelled the economic growth of developing countries. The expansion of trade and low global inflation had a significant effect on the pattern of Brazilian trade, especially in relation to China’s emergence as a global economic superpower (da Costa and Jank Citation2021). As can be observed in Figure 1, within two decades China became the main market for Brazilian exports (Wesz Junior et al. Citation2021), which from 2000 to 2020 increased by 6048%, going from a little more than US$ 1.08bn to more than US$ 67.7bn. China, which accounted for only 1.97% of the total value of Brazilian exports in 2000, accounted for almost one-third (32.40%) in 2020. Imports of Chinese products followed a similar path. In 2020, they reached almost US$34.8bn, or 21.9% of the total value imported, representing an increase of 2,752% in 20 years (Camex Stat, several years).

Figure 1. Brazilian exports and imports to/from its 10 largest trade partners 2000–2020 (Value in US$ FOB). Source: Brasil, MDIC, ComexStat (Citationn.d.) (several years) (charted by the authors).

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The economic weight (i.e. GDP) of the United States and Europe continue to be decisive factors, as well in Brazilian trade relations. They are Brazil’s second and third-largest trading partners in terms of export and import values, showing that despite the profound international transformations that have occurred over the last two decades, these two global economic powers remain a fundamental gravitational force in the international economic order.

Besides the heavyweights of China, the EU and the US, it is important to look at Brazil’s trade with its neighbors. The proximity of the Mercosur customs union and the synergy of its productive chains are factors that favor Brazil’s exchanges with its regional partners. However, the economic weight of these partners, the way in which regional economic integration was constituted, and the existence of similar sets of resources (e.g. land for agricultural production) limit the extent of mutual trade.

The rise of agricultural commodities in the Brazilian trade happened at the same time there was a deindustrialization of the Brazilian economy. As can be seen in Figures 2 and 3. Brazil's export mix had been diversified, including sophisticated products such as aircraft, machinery, and automobiles at the beginning of the 2000s. By 2020, however, Brazilian exports were dominated by primary products such as soybeans, iron ore, and oil. The process of reprimarization of the Brazilian economy, characterized by the increase in exports of natural resource-intensive goods and the concomitant increase in imports of manufactured products has been highlighted by several authors (Bacha and Fishlow Citation2011; Hiratuka and Sarti Citation2017; Morceiro Citation2012; Morceiro and Guilhoto Citation2020; Oreiro and Feijó Citation2010). Indeed, as reported by the Secretariat of Foreign Trade (SECEX), in 2018, for the first time after many decades, Brazil has again had more than 50% of its exports based on basic products. Brazil has increased its dependence on commodities and its economy has been facing a deindustrialization process that began in the 1990s but increased in the 2000s (Oreiro and Feijó Citation2010).

Figure 2. Main exporting sectors and the respective values of Brazilian exports in 2000 – in US$ billion FOB. Source: Brasil, MDIC, ComexStat (2000) (charted by the authors).

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Figure 3. Main export sectors and respective values of Brazilian exports in 2020 – in US$ billion FOB. Source: Brasil, MDIC, ComexStat (2020) (charted by the authors).

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The case of soybean production in Brazil is emblematic. In 2000, the value of exports from the oilseed complex represented 5% of the total value exported by Brazil. In 2019, it reached 14.7%, and in 2020, 16.8% (Camex Stat, several years). A significant part of this increase is due to Chinese imports (Wesz Junior et al. Citation2021), which represented more than 70% of the total soybean value exported by Brazil that year. Iron ore followed a similar path. Stimulated by China's demand, the relative value of its exports grew significantly, reaching 9.9% of the total value exported. Oil exports are in the same order of magnitude (9.35%) and are directed toward the same destination: China. On the other hand, there has been a considerable increase in imports of manufacturing products, both low capital-intensive goods and products with higher technological content. Thus, while the sectors producing natural resource-intensive goods showed clear signs of growth and high international competitiveness, Brazil showed growing deficits in international trade of manufactured goods. China's dizzying economic growth and its ‘appetite’ for natural resource-intensive goods has had profound consequences for Brazil's patterns of trade (da Costa and Jank Citation2021; Wesz Junior et al. Citation2021). Several studies have pointed out that this deep dependence has created new vulnerabilities for the Brazilian economy and agribusiness sector (da Costa and Jank Citation2021; Escher and Wilkinson Citation2019; Wesz Junior et al. Citation2021).

The commodity supercycle

As a result of the growing integration of the Brazilian agri-food system into global agricultural commodity markets, the behavior of food prices in Brazil is increasingly influenced by these market dynamics. Figure 4 shows the behavior, over the last two decades, of the main commodity indices produced by the International Monetary Fund (IMF). Since the early 2000s, the commodity price path has been characterized by three distinct periods. The first, known as the ‘commodity boom’, started in the early 2000s and was marked by a rapid increase in prices until 2008. The second period was a result of the financial crisis, when there was an intense fall in prices observed in late 2008 and 2009. The third phase was a recovery period between 2011 and 2014, and the indices have remained at historically high levels since.

Figure 4. Price of major commodities between 2000 and 2021 (index number being 1996 = 100). Source: IMF (several years) (charted by the authors).

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Comparing the main commodity price indices, one can see that the supercycle was much more vigorous in the energy markets than in the food markets. Between January 2004 and January 2008, for example, the energy price index grew by 148% while that of food and beverages rose by 49%. The cycle reversal phase began in 2014 and lasted two years. Between 2016 and 2020 prices fluctuated, but without showing any clear trend of growth or decline. Since the pandemic, after a sudden and intense decline in early 2020, commodity prices have risen sharply again.

According to experts (Baffes and Haniotis Citation2010; Radetzki Citation2006; Wright Citation2011), the supercycle observed between 2004 and 2014 was the combined effect of an intense demand shock caused by accelerated Chinese economic growth, the greater integration between agricultural commodity markets and energy markets due to biofuels, the reduction of stocks of public food, more extreme and volatile climatic conditions and the greater involvement of financial actors – mainly investment funds – in the commodity markets (Clapp Citation2013).

The accelerated industrialization process in China allowed for a rapid rise in per capita income while driving intense urban growth. With hundreds of millions of people moving into cities and enjoying greater purchasing power, the demand for protein-rich food rose substantially leading to an increase in the production of meat, mainly pork, and escalating demand for imported grain, such as soy and corn (Wesz Junior et al. Citation2021). In a situation where stocks were historically low and agricultural productivity was stagnant, the Chinese demand shock fueled a long process of rising commodity prices. Only in 2014, when the growth of the Chinese economy deaccelerated, the commodity prices started to decrease.

The sharp increase in biofuel production from 2004 onwards is another important factor in determining food commodity prices. Policies promoting biofuels, implemented in the 2000s, redirected land towards biomass production and increased the integration between food and energy markets. As can be seen in Figure 5, biofuel production grew slowly in the years prior to the early 2000s. It is important to stress that Brazil is one of the biggest ethanol and biodiesel producers. High oil prices, the need to promote environmentally cleaner fuels, and the need to find new ways to secure income for farmers, led several countries to implement policies fomenting biofuels, most notably the United States and the European Union. Between 2004 and 2014, biofuel production grew by 427%, with much of this growth occurring between 2004 and 2008, then receding due to the repercussions of the financial crisis and growing controversies over the effects of increased biofuel supply on food prices (Mueller, Anderson, and Wallington Citation2011; Ziegler Citation2008).

Figure 5. Production and annual variation of biofuel production 1990–2020. Source: Our World in Data (Citation2022) (charted by the authors).

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The graphs in Figure 6 show the trajectory of food prices for the main agricultural commodities between January 2000 and September 2021. It is clear that prices have followed the commodity supercycle, whereby prices have risen in these two decades. Moreover, agricultural commodity prices were at higher levels in 2020 than in 2004, signaling a likely trend of increasing relative food prices in the long run, which is critical to contextualize the food challenges in the coming decade.

Figure 6. Brazil: Evolution of the main agricultural commodities prices 2000–2021 (in US$). Source: IMF (Several years) (charted by the authors).

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In general, grain prices have exhibited strong growth. Soybeans, corn, wheat, and rice showed a trajectory marked by the long supercycle with a price growth trend between 2004 and 2011 and a sharp decline in 2014. From 2015 until mid-2020, prices were fixed above the values observed before the boom. And since the second half of 2020, except for rice, grain prices have again exhibited strong growth.

Whereas prices of animal protein did not necessarily follow the supercycle, their upward trends are in line with research showing that increases in income in importing countries have expanded demand for protein (Escher and Wilkinson Citation2019; Wesz Junior et al. Citation2021). When income and urbanization increase, demand for meat grows, which puts pressure on its prices (Milford et al. Citation2019; Ortega, Wang, and Eales Citation2009). These commodities were mainly characterized by an upward trend from 2004 to 2015 with a subsequent stabilization at high levels. There is no reason to expect that demand for imports in China, Arab countries, and most developing countries will fall sharply in the next decade, and as there are environmental limitations to the rapid increase in export supply (Hannah et al. Citation2013), beef and chicken prices should remain high in the short term.

Coffee, sugar, and orange juice follow in part, the general trend: prices grew until the early 2010s and started a downward movement beginning in 2014. Prices for these commodities, however, did not return to the levels observed at the beginning of the cycle. The prices of these commodities, as well as most others, have shown an intense process of appreciation since mid-2020, reflecting logistical obstacles that greatly affected shipping and, stockpiling, as well as climate issues that impacted the main commodity-producing regions in 2019 and 2020.

Agricultural commodity supply and land use

If commodity prices rise, producers are encouraged to increase output and tend to allocate more resources to the production of those commodities, using a larger area for farming. The cases of soybeans and corn are perfect illustrations of this relationship between prices, export supply, and land use trajectories. As can be observed in Figures 9 and 10, over the last 20 years both the planted area and production of soybeans and corn have grown substantially. Between 2000 and 2020, soybean production, for example, increased by 253.63% and the planted area by 175.8% (CONAB, several years), involving not only the Center-West and Southern regions of the country, which concentrate the supply of oilseeds but also the other macro-regions as well. In the northeastern Cerrado (a kind of Brazilian savanna), productivity per hectare already reached the levels observed in the two major producing regions. Soybean plantations are also advancing in the North and Southeast regions with high productivity, where soybean often competes for land with sugarcane.

Figure 9. Comparative evolution of the Area (in thousand ha) and the production (in thousand tons) of soy, corn, rice and beans in Brazil 2000–2020. Source: CONAB (Citationn.d.) (Several years) (charted by the authors).

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Figure 10. Number of Specialized Rural Investment Funds in the World (2005–2020). Source: Valor Advisor (Citation2020).

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Stimulated by the exports of grains and meat, the production of corn grew 145% between 2001 and 2020, and the planted area expanded by 61.2% (CONAB, several years). The largest vector of this expansion occurred in the Central-west region. Based on a mechanized, large-scale production model integrated with global grain and meat chains, corn production has taken a strong lead in terms of productivity and quantity produced.

In contrast, rice and beans, two staples of the Brazilian diet, presented a decrease in planted area and stagnation of production. The fall in bean consumption and the low integration of rice production into global commodity chains have discouraged planting. However, increased monocultural and mechanized production in some regions allowed substantial productivity gains, which ensured that production did not decline. Regarding rice, production is concentrated in the South but it faces risks due to climatic conditions.

The improved productivity of common bean crops is a result of greater technification of production accompanied by spatial reallocation. The Northeast region remains the main producer in terms of area (1,467 million hectares), yet this shrank by 38.3% between 2001 and 2020, and regional productivity remained very low: less than half a ton per hectare. The relocation of a portion of production to the cerrado region of the Center-West Cerrado – where there are farms that have available capital, land, and irrigation systems – allowed productivity gains and made this established soybean and corn-producing region the largest common bean complex in the country.

Nowadays, in this new stage of ‘financial globalization’ financial reasons add new pressures on agriculture and land use. As Brazilian agricultural production becomes strongly connected with global value chains, it is also important to draw attention to the speculative attribute, beyond productive and commercial dynamics. In this scenario, land is a factor of production and increasingly an asset for speculation. In fact, as Clapp (Citation2013) and Fairbairn (Citation2020) report, stimulated by the price boom and the financial crises in 2008, lands are becoming financial assets for financial investors (as alternative assets). The growing role of such alternative assets are gaining in investors portfolios can contribute to rising land prices and, therefore, increases in the costs of food production in general and not just commodities. Despite the difficulty of clearly mapping its channels of influence, land speculation cannot be ignored as a factor in the rising cost of food.

As can be seen in Figure 10, there has been a sharp increase in the number of investment funds around the globe that are specialized in the rural and agri-food sectors, jumping from 41 funds in 2005 to over 600 in 2020. As Delgado (Citation2021) points out, the Brazilian state has been promoting law changes aiming at a greater integration of agriculture and financial markets. Recent legislation on the subject (the Agro Law of 2020 and the new Agroindustrial Production Chain Investment Fund – FIAGROFootnote⁷ of 2021) both reinforces this trend and expands its possibilities, connecting food security indirectly with this new financial dimension of agri-food.

As can be seen in Figure 11, the average price of land grew sharply between 2001 and 2013. Good-quality land with high production capacity, for example, has experienced a 550% rise in nominal terms. Similar behaviors were observed in the cases of prices of land with average production capacity (+490%) or low capacity (+427%). That is, the supercycle has had an impact on the prices of all kinds of land.

Figure 11. Comparative Median land prices by production quality 2001–2013 and 2014–2019 (in R$/ha – current values). Source: FNP (Citationn.d.) (Several years) (charted by the authors).

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During the second half of the 2010s, the decline in international prices was accompanied by exchange rate depreciation. The fall in international prices, therefore, did not have such a significant impact on commodity prices in local currency. As we have already seen, soy and beef prices have tracked above inflation. However, the end of the commodity supercycle would imply that trade was no longer a force pushing up land prices. But as can be seen in Figure 11, between 2014 and 2019, land prices continued to grow, but at a lower intensity. In particular, the end of the supercycle seems to have reduced the marginal value of land, as shown by the loss of interest in lower-quality land assets. However, in spite of the fall in international prices, land values are still rising in areas of higher productive capacity, particularly properties in the Northeastern Cerrado, a region now referred to as MATOPIBA.Footnote⁸

Contemporary literature refers to the appreciation of land and natural resource assets as the land rush (Edelman et al. Citation2013) and highlights the appetite for capital (national and worldwide) for land. The topic made headlines in 2009, particularly (Deininger and Byerlee Citation2011; Grain Citation2019). Land appreciation, whether for speculative gains or larger anticipation of profits from the production of commodities for international markets (after the commodity boom), resulted in the displacement of small farmers and traditional populations from their lands in a number of instances (Sassen Citation2016). The conversion of land use (replacing regions traditionally devoted to domestic food production with crops aimed at the worldwide market) can also have an impact on local markets, leading to price hikes and food insecurity. Despite challenges in quantifying the quantity of land expropriated (Edelman Citation2013), several studies suggest that recent trends of land appreciation exacerbate processes of land concentration, with detrimental effects on food security in the territories (Anseeuw and Baldinelli Citation2020).

Trade, environment, and food security

The interconnections between trade and food security also pose new challenges related to biodiversity. Large-scale production of commodities, such as soybean monoculture and extensive livestock farming, threatens biodiversity, its numerous services, and the fragile climate balances that are so important for food production and human life as we know it. The loss of biodiversity and deforestation also represent high risks to food security (Hannah et al. Citation2013; Thrupp Citation2000). Biodiversity degradation and climate change are probably the main factors threatening long-term food security, and, the growing integration of Brazilian agribusiness into global markets means the expansion of commodity production.

The data from the Annual Mapping of Land Use and Land Cover in Brazil – MapBiomas project points to a worrying scenario, which may have harmful consequences for Brazilian and global food security in the not-too-distant future. Figure 12 shows the decline of the forest area in Brazil between 1985 and 2020 as well as its annual variation. Although it is important to stress this disturbing loss of forest, it is noticeable that between 2003 and 2011 deforestation was less intense. This reduction was a result of credible environmental control policies, including the Amazon soybean moratoriumFootnote⁹; that deforestation decreased, at a time when commodity production has accelerated shows that it is possible to foster increases in food production without sacrificing the environment (Nepstad Citation2014).

Figure 12. Forest area (in ha) and its annual variation (in %) Brazil – 1985–2020. Source: MapBiomas (Citationn.d.) (Several years) (charted by the authors).

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Several studies have pointed out that many degraded lands could be converted into productive areas while making production systems more intensive and sustainable (Gomes Citation2019; Mallmann Citation2018; Nastari Citation2018). In the context of an open agricultural frontier with cheap land reserves and a lack of well-defined property rights, and without effective environmental policies, intensification and higher yields will continue to produce deforestation. several civil society organizations stress that biodiversity conservation and food security in Brazil is intrinsically tied to respecting traditional communities’ land use rights, which calls into question the monoculture model of agribusiness (Anseeuw and Baldinelli Citation2020; Grain Citation2016; Citation2019; Oxfam Citation2020; Sen and Dabi Citation2021).

The recent rise in deforestation rates and the various signs that climate conditions are becoming more challenging for food production (more severe droughts, extremes of heat and cold, etc.) are warnings that must be taken seriously when looking at the future of food security (Hannah et al. Citation2013; Thrupp Citation2000). The future may be conditional if the continued integration of agribusiness into global markets puts ever greater demands on the environment, increasing pressure on already fragile biomes.

Poverty, access to food and food security

Food (in)security is also closely linked to poverty and thus to economic cycles. According to Claudio Considera, coordinator of the GDP Monitor at Getúlio Vargas Foundation, between 2011 and 2019 the Brazilian economy registered a growth of only 0.7% a year, which places this decade as having one of the lowest average annual growth in 120 years (Carrança Citation2021). This scenario resulted in higher unemployment and hit above all the weakest groups in the labor market.Footnote¹² Informality, on the other hand, rose sharply. In 2019, according to data from the PNAD, workers without formal contracts, employers without legal registration, and auxiliary family workers represented 41.1% of the working population, equivalent to 38.4 million people – the largest contingent since 2016.

With the advent of the COVID-19 pandemic, this situation worsened. Social isolation measures to confront the pandemic have shaken the world economy, including the Brazilian economy, with serious social consequences. The average unemployment rate in Brazil reached 13.5% in 2020 (the highest rate in the historical series that began in 2012). Unemployment, obviously, affects social groups differently according to education, age, race, gender, and geography. The IBGE's PNAD shows that the highest rates of unemployment were registered in the North and Northeast of Brazil. Unemployment affected more women (16.4%) than men (11.9%), and weighed most heavily on Black and mixed-race people (17.2% and 15.8% respectively), young people and people with low levels of education. People working in the informal economy were the first to feel the burden of social isolation measures because they are usually vulnerable workers who have no income guarantee and depend on daily work to survive (Barros Citation2021).

The manifestation of food insecurity, then, reinforced the already known picture of Brazilian social and regional inequalities. According to the Rede PENSSAN (Citation2022), the North and Northeast regions concentrated households with the lowest levels of food security (less than 28.4% in the North and 32% in the Northeast, while the national average was 41.3%) and the highest indicators of moderate and severe food insecurity (severe insecurity was 25.7% in the North and 21% in the Northeast, against a national average of 15.5%). It remains strong in rural areas suggesting that rural household are facing growing difficulties to produce food for their own subsistence, either because they do not have support enough from State and public policies to maintain a sufficient and diversified production or they do not have sufficient and secure access to land and other production factors. According to the survey, as family incomes increase, food security is improved (households with income less than or equal to ¼ minimum wage per capita face severe food insecurity, 2.5 times higher than the national average).

Although poverty and hunger are urgent and deserve immediate action – assistance and the transfer of income and food, for example – it is important to emphasize that food security cannot simply be reduced to a matter of supply or poverty (or insufficient income). The factors analyzed in this work suggest that hunger is intertwined with the unequal structure that permeates Brazilian society, including the hegemonic food system that today dominates the production, processing and distribution of food and whose operations reproduce hunger in the midst of abundance.