Sustainable Brazil
Brazil’s perspectives in the agricultural industry
Table of Contents
Introduction
3
What should we expect from agribusiness?
Challenges for the Sector
4
Brazil’s Trajectory
13
The Market in 2030
17
8
Introduction
This is the fifth* in a series of
publications that analyze the prospects
of the Brazilian economy over the next
two decades, with special attention to
its strategic sectors, determined both
based on their importance in wealth
creation and the long-term opportunities
they represent. In this context, Brazil’s
prospects in the agricultural industry,
the subject of this publication, occupy
a privileged position both due to their
importance in generating income and
jobs and their role in Brazil’s position in
world trade.
*This publication has been
produced in 2009. Since then,
the Sustainable Brazil series
has six publications. The latest
survey, titled “Sustainable
Brazil - Social and Economic
Impacts of the 2014 World Cup”,
was launched in 2010.
The approach takes into account
Brazil’s potential in its interactions with
the world market in order to outline
scenarios through the year 2030. A
deep understanding of the behavior
of the principal determining factors of
the global situation is a prerequisite for
valid projections of Brazilian growth. A
set of data encompassing a universe of
one hundred countries was analyzed,
not just in economic terms, but also in
terms of demographic dynamics, quality
of life, human resources and natural
resources. The subjects addressed in the
publications are the following:
The potential of the housing market;
Economic growth and consumer
potential;
The challenges of the energy
market;
The outlook for manufacturing
competitiveness;
Brazil’s perspectives in the
agricultural industry.
This study, carried out jointly by
Ernst & Young Terco and the Getulio
Vargas Foundation, also attempts to
define the concept of development for
Brazil over the coming decades. Thus,
this study looks at long-term trends
in which the effects of crises like the
current one, begun in the US housing
market and taking on global dimensions,
represent temporary deviations that
are smoothed out over the time period
considered for the projections.
More important that asking how much
the country will grow is asking if it will
grow well, leveraging its potential to the
maximum, but in a sustainable way.
The conditions for this are given, and
this publication provides valuable insight
into discussions on the perspectives of
the Brazilian economy and on corporate planning.
4
SUSTAINABLE BRAZIL BRAZIL’S PERSPECTIVES IN THE AGRICULTURAL INDUSTRY
What should we expect from
agribusiness?
Trends Through 2030
Our understanding of the
relationship between industrial
growth and development has
changed significantly in recent
decades. Up until the 1970s,
progress was synonymous with
the presence of automotive,
machine and equipment sectors,
and agricultural production was
considered typical of countries in
the initial stages of development.
Environmental imperatives and the
struggle against social inequality
have slowly eroded this view.
Important events in recent
years -- such as the depletion of
agricultural land in various regions,
changes in demographic dynamics,
environmental concerns and the
search for alternative sources of
energy -- have placed agricultural
activities in a strategic position
in defining the future of national
economies and international trade
flows. This dynamic has been seen
on a global scale, in two large trends.
From the point of view of
demand, new consumption
habits have appeared, with
growing requirements for food
safety and the sustained use
of natural resources -- a fact
observed notably in developed
countries. In emerging
economies, the rapid growth
of the population’s average
income has generated additional
pressures on the demand for
food. This means that the
agricultural industry product
market is not only expanding,
but has assumed a qualitative
profile different than that seen
in the past. At the same time,
products in the food industry
chain have also become
alternative energy sources, such
as raw materials for biofuels,
increasing its strategic role.
The second trend is in the
supply of agricultural goods.
Technological change has
occurred to meet demand, at
scales and standards required
by the international market.
Biotechnology, information
technology, business and supply
chain management methods
are, today, all more relevant
technological inputs for the
agricultural industry. The case
of beef is typical. Sale to richer
countries requires detailed
identification of the origin of
the cattle.
In face of the growing shortage
of arable land, a fundamental
question for the scenario of the
The progressive increase in family income,
especially in poorer countries, will create
millions of new consumers.
coming decades is the ability of
technological advances to allow the
agricultural industry to respond
adequately to the growth and
changes in demand. In the case of
Brazil, it is crucial that the current
agricultural productivity dynamic is
identified, along with its prospects
for the coming decades.
As seen in the second publication in
this series, the world growth profile
for the coming decades will be
convergent, or in other words, the
largest GDP expansion rates will be
seen in countries that, today, have
the lowest income levels (such as
China and India) or medium income
levels (like Mexico and Brazil).
This indicates an intense growth in
consumption, since the progressive
increase in family income, greater
in the poorer countries, will result
in millions of new consumers.
However, the relation between food
consumption and income evolution
has an additional effect to be
considered. The percentage of a
family’s total income spent on food
will fall as income increases. In rich
countries, consumption of these
products is not very sensitive to
family income increases.
In general, significant growth in
international trade of agricultural
products and agricultural raw
materials is expected through
2030. But this growth should be
less than increases in income and
total consumption, which highlights
the importance of correct mapping
of business opportunities in this
segment in the coming decades.
Food expenses* and per capita income in 2007
% of expenses spent on food
0.6
Nigeria
0.5
India
0.4
Bolivia
Peru
0.3
BRAZIL
Spain
Chile
Italy
0.2
France
Japan
United States
Germany
0.1
0
10,000
20,000
30,000
Per capita income (constant US$)
Source: Getulio Vargas Foundation, based on FAOStat data.
* Food expense data is for 2005
40,000
50,000
6
SUSTAINABLE BRAZIL BRAZIL’S PERSPECTIVES IN THE AGRICULTURAL INDUSTRY
Brazil’s Specialty
industry productivity will certainly
be affected by these two factors. In
Brazil, policies to increase biofuel
production will be more successful if
climate alterations become important
and less successful if protectionist
practices interfere. Similarly, the
expansion in Brazil’s share of the
world meat market does not depend
exclusively on local efforts to improve
the sanitary conditions of national
herds, but also on the opening of
interesting markets, such as Japan.
The agribusiness chain will increase
significantly in Brazil.
In 2005, Brazil’s agricultural GDP
reached R$ 438 billion, or 23.8%
of national income. In richer
countries, like the US, agriculture
represents only 16.7%. Analyzing
the conditioning factors through
2030, two additional aspects
deserve emphasis due to their
impact on international trade
conditions. The first is negotiations
on trade barriers imposed on
agricultural industry products in
different markets. The second is the
evolution of climatic changes.
Market share indicators allow a
first assessment of the current
performance of the Brazilian
agricultural industry. The
competitiveness of a company or an
entire sector, especially in the case
of the agricultural industry, can be
defined as the ability to attain and
maintain market share in a sustained,
The results of government policies
and corporate strategies related
to an increase in agricultural
profitable way, looking at profits with
respect to competitors and demand
expansion rates.
From 1995 through 2005, for
example, Brazil became the world
export leader of alcohol and chicken
and stayed at the head of the sugar,
coffee and orange juice markets. In
the case of beef, Brazil advanced
significantly, having the second
largest share of world exports in
2005, at the same time it lost its
leading position in exports of soy oil.
Brazil has achieved significant
advances in markets that, in 1995,
were considered nontraditional for
the agribusiness exporting segment.
This is the case of processed food,
which had a small export base and
grew rapidly in the foreign market.
Simultaneously, the less dynamic
Increase in agricultural and livestock raising productivity between 1960 and 2005
2.0
In %
2.0
1.8
1.5
1.5
1.5
1.3
1.0
1.2
1.2
1.1
1.0
0.9
0.9
0.8
0.8
0.8
0.5
0.7
Source: Getulio Vargas Foundation
M
au
rit
iu
s
Un
St ited
at
es
Ca
na
da
Ni
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ria
Pe
ru
Et
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op
ia
In
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sia
Gu
at
em
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a
Ira
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Tu
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Ar
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in
a
Ba
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In
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A
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7
sectors correspond to traditional
Brazilian exports, like orange juice,
soy oil and coffee, whose annual
growth rates were small or negative.
Promising Market
Shares
Planning for government policies
for the sector must respond to two
decisive questions on the scenario
for the Brazilian agricultural
industry. Will the performance
over the last ten years continue in
the coming decades? What are the
opportunities and challenges for the
sector in the global context?
Assessing the principal players in the
food and agricultural raw material
sectors, Brazil had the largest
productivity gains in the agriculture
and livestock raising sector from
1960 to 2005. In this period,
productivity rose at a rate of more
than 2% annually, a rate greater
than that of China (1.8%), India and
Argentina (1.5%), the United States
and Canada (0.8%).
In recent years, especially since the
1990s, these productivity gains
resulted in a deliberate increase in
exports, as seen with cellulose, and
an increase in the importance of food
processing and innovation.
Productivity gains throughout the
agricultural industry chain will
continue to lead to greater market
share, both for processed products
and agricultural raw products.
Thus, sustaining competitiveness
in the sector depends on the
capacity to respond to international
market challenges, which requires
innovation and technological
advantages.
A critical factor affecting
agricultural industry performance
is the high protectionism levels
practiced by important markets,
but there is reason for optimism.
As discussed in the second
publication in this series, the
reference scenario of this study
forecasts average growth of the
Brazilian GDP of 4% annually, and
3.5% annual growth of the world
GDP, in a context in which trade
flows increase along with pressure
for environmentally correct
choices. The confluence of these
factors lead us to assume greater
trade openness, with slow, gradual
opening in the coming decades.
As we will describe in more detail
in the last chapter, Brazilian
agricultural exports will grow at
an average annual rate of 1.3%
through 2030: 1% per year for
processed food and 2% per year for
raw materials. These percentages
are greater than the annual
average growth of world food
imports (0.9%) and agricultural
raw materials (1.2%), which would
imply a continuous increase in
Brazil’s market share. Domestic
consumption is estimated to
expand at a rate of 3.8% through
2030. Taking into consideration
that the demand for food is not
closely related to increases in
family income, consumption
should increase 2.9% per year,
with an emphasis on protein and processed products.
8
SUSTAINABLE BRAZIL BRAZIL’S PERSPECTIVES IN THE AGRICULTURAL INDUSTRY
Challenges for
the Sector
The Production
Chain
Estimates of the outlook for the
agricultural industry involve
assessment of recent performance.
This chapter discusses the principal
questions in the sector in order to
provide a basis for the scenarios
and guide corporate planning.
The term agribusiness appeared
for the first time at the end of the
1950s, coined by the American
economists John H. Davis and
Ray A. Goldberg, and refers to all
activities related to agriculture and
livestock farming and its products
in a chain that begins with the
production of agricultural inputs,
involves activities in the field and
manufacturing, and ends with
distribution to the final consumer.
This last stage includes the food
and retail food sectors. The
agricultural industry, the principal
object of this study, is one of the
links in this chain and includes
processing and industrialization of
agricultural, livestock and forest
products. Primary activities have
lost ground in generating value in
relation to the country’s agricultural
industry sector.
The agricultural industry’s share in
the Brazilian GDP grew from 3.8%
in 2000 to 4.4% in 2005 according
to estimates based on national
accounts. This trend is related
principally to an increase in eating
out, and eating prepared and frozen
food. In the United States, for
example, the percentage of family
expenses spent on food consumed
at home fell from 14.1% in 1970
to 7.5% in 2003; the average for
rich countries fell from 22% to 13%
during the same period.
This situation is distinct from that
seen today in developing countries.
In Venezuela and Thailand, for
example, the percentage of
expenses spent on food eaten at
home was about 30% in 2003,
which indicates a large potential
market for processed food. In
Brazil, the percentage of expenses
spent on food eaten at home is
currently relatively low, at 11.9% in
2005. An analysis of the changes in
consumption of Brazilian families,
developed in the second publication
of this series, projected that this
percentage would decrease to 9.7%
in 2030.
The agribusiness chain in Brazil, % of GDP (2005)
2.9%
Suppliers of
raw materials
13.3%
Farming, livestock
raising and plant extraction
4.4%
The agricultural
industry
Principal suppliers of Brazilian agribusiness, % of total in 2005
3.2%
Distribution and
consumption
9
The Quest for
Productivity
of productivity based on data
from the Food and Agriculture
Organization (FAO) of the United
Nations. This means that Brazil
is very far from world leaders in
agricultural productivity like the
United States, Canada, France and
Australia, but is ahead of other
important players like Russia,
Ukraine, Colombia and China.
The growth of production and
consumption of agricultural
products in the coming decades
will be conditional on a dynamic
related to increased efficiency in
production and to maintenance
of the dynamism in processing
activities.
In order for the
Brazilian
The agribusiness
chain
in Brazil,
% of GDP
(2005)
A fundamental
factor
to be
agricultural industry to be able
considered is the fact that Brazil is
to position itself in this process
expanding its arable land, contrary
in a sustained way, it must seek
to the trend in most countries
competitiveness continuously,
exporting agricultural products. In
which implies an even greater
Australia and Ireland, important
innovative effort, both in
competitors in the production of
agribusiness and in other activities beef, arable land area fell at rates
2.9%
13.3%
in the chain.
of 0.46% and 0.85% per year,
respectively, from 2000 and 2005.
In Colombia, a direct competitor in
Based on the agricultural GDP per
Suppliers of
Farming, livestock
theand
coffee
worker,
has average levels raising
rawBrazil
materials
plantmarket,
extractionthis reduction
exceeded 1% annually in the
same period. In contrast, arable
land in Brazil expanded 0.17%
per year on average, increasing
from 261.4 million hectares in
2000 to 263.6 million hectares
in 2005. Of the principal players
in the world agricultural industry
product market, only China has had
a greater increase in agricultural
area than Brazil, at 0.28% annually,
totaling 556.3 million hectares in
2005. However, the productivity
level of that country is extremely
low, equivalent to only 15%
of that of Brazil. In Argentina and the United States, expansion of arable land has not reached
0.1% annually.
4.4%
3.2%
The growing use of machines and
fertilizers in Brazilian farming and
The agricultural
Distribution and
livestock
indicates
industryraising, which
consumption
Principal suppliers of Brazilian agribusiness, % of total in 2005
Information services
3.3%
Pesticides
3.9%
Services rendered
to companies
4.6%
Electricity
5.9%
Oil and natural gas
6.0%
Food and beverage
7.6%
Chemicals
8.1%
Financial intermediaries
8.5%
Transport and storage
10.5%
Trade
Source: Getulio Vargas Foundation
18.1%
2%
4%
6%
8%
10%
12%
14%
16%
18%
10 SUSTAINABLE BRAZIL BRAZIL’S PERSPECTIVES IN THE AGRICULTURAL INDUSTRY
a significant change in production
methods. For example, from 2000
to 2005, nitrogen fertilizer use in
the country increased from 6.7
to 7.8 metric tons per thousand
hectares, an annual growth rate of
5.2%. But Brazil is still far from the
intensive use seen in productive
countries like Germany, France
and Ireland -- and the difference
is even more accentuated in
comparison with China and the
United States.
The Key to the Future
Technological innovation is the
principal foundation of sustainable
competitiveness in all areas of
industrial activity, and the recent
performance of the Brazilian
agricultural industry proves
this. The most successful and
most promising segments are
those that better interact with
the international competitive
environment, with a quest for
state-of-the-art technology, either
in relation to products, production
processes, or management
techniques.
However, the Brazilian agricultural
industry is not seen as a great
generator of innovation. According
to data from the Industrial Survey
of Technological Innovation
(Pintec-IBGE/2005), only one
third of companies in the food
industry implemented innovations
in products and processes between
2003 and 2005. In this last
year, the money spent by these
companies on innovative activities
was on the order of 1.7% of their
net revenues and, specifically on
internal R&D activities, spending
was just a tad over 0.1% of
revenues -- a level corresponding
to one sixth of a percent of that
of the Brazilian manufacturing
industry as a whole. In the United
States, spending on R&D for all
manufacturers was 3.6% of net
sales -- in the food and wood
industries, for example, spending
was 0.7% and 0.8%, respectively.
Europe
5.1
R&D spending as a proportion
of sales, 2005 (%)
United States
3.6
Brazil
0.6
Sectors
Manufacturing
Food
0.1
Beverages
0.1
Tobacco
0.2
Cellulose and paper
0.2
n.a.
0.5
Wood products
0.1
0.8
n.a.
0.7
0.7*
1.5
0.5
0.9
Source: Pintec (2005). Eurostat and National Science Foundation. Division of Science Resources Statistics (2007). (*) Beverages and tobacco together.
Profile of innovative companies (%)
Innovative companies that
are responsible for
Food
0.1
Beverages
0.1
Tobacco
0.2
Cellulose and paper
0.2
n.a.
0.5
Wood products
0.1
0.8
n.a.
0.7
1.5
0.5
0.7*
0.9
11
Source: Pintec (2005). Eurostat and National Science Foundation. Division of Science Resources Statistics (2007). (*) Beverages and tobacco together.
Innovative companies that
are responsible for
Profile of innovative companies (%)
Percentage of companies that innovate
Total
Among
exporters
Among nonexporters
Among
domestic
companies
Among
foreign
companies
% of jobs
% of sector
GDP
Manufacturing
33.6
59.0
30.4
32.9
67.2
62.1
82.8
Food
Beverages
Tobacco
Wood products
Cellulose
Paper and paper products
31.9
42.1
25.2
28.3
51.7
31.4
66.2
77.4
39.5
38.4
83.3
61.4
29.2
38.1
8.3
26.4
43.5
28.5
31.4
41.3
17.0
28.1
48.1
30.7
82.4
85.2
68.3
60.7
100.0
70.3
68.0
74.0
55.4
43.4
84.2
61.1
80.6
89.0
76.1
57.0
89.1
84.9
Sectors
Source: Pintec (2005).
With relatively low investments
in R&D, how did Brazil achieve
leadership in various international
agribusiness product markets?
First, the reduced spending on
this item hides large differences
between segments. In the food
industry, for example, innovative
companies responded for 80.6% of
the value generated in the sector
and 68% of jobs. The concentration
of innovative activities in large
companies is seen as a rule in the
domestic agricultural industry.
The disparity in the propensity to
innovate is also clear when the
analysis criterion is exporting
or the nationality of the capital:
the typical innovative Brazilian
agricultural industry company
exports and has foreign capital.
A second explanation for the
recent success of the domestic
agricultural industry can be found
in the concept of innovation itself,
neglected in various analyses.
According to the Oslo Manual
(OECD, 1995), an international
reference on the subject,
innovation consists of “release of
products (goods and services)
or adoption of processes that are
technologically new or significantly
improved.” This definition--broad
and precise at the same time-makes clear that the concept is not
tied solely to the R&D activities
carried out within companies.
Similarly, the term “processes”
is not restricted to productive
processes, but includes all company
activities, including marketing and
distribution strategies, technical
cooperation agreements and
certification, among others.
In summary, the assessment of
the innovativeness of a company
or sector should not be limited
to R&D spending. There are
complementary activities that are
as important or more important for
innovation that, in the case of the
Brazilian agricultural industry, can
be seen to have great relevance
in generating and sustaining
competitiveness.
In 2005, according to IBGE data,
more than 92% of agricultural
industry companies that innovated
in their processes declared that
the principal entity responsible
for developing the innovation was
another company or institute, and
only 5% were in-house. Thus, the
Brazilian agricultural industry can
be characterized by outsourcing of
R&D activities, a practice common
in segments in which various
alternative production techniques
are available.
Of the companies that innovated
in processes, 96% declared they
adopted solutions that already
existed in Brazil -- and a little
over 61% affirmed that these
solutions were improvements on
existing processes. This standard
allows us to characterize the
12 SUSTAINABLE BRAZIL BRAZIL’S PERSPECTIVES IN THE AGRICULTURAL INDUSTRY
Brazilian agricultural industry
as innovative, but centered on
processes and the practice of
technological outsourcing.
Spending on internal R&D is
mostly to allow companies to
absorb innovations created
outside the company. In turn,
the objective of this training is
to form a set of complementary
assets that are often intangible
but essential to increasing
productivity. This is the typical
case of human capital, the target
of growing attention in various
agricultural industry chains in
recent years.
Thus, the Brazilian agricultural
industry is characterized
much more by absorption
than autonomous generation
of technology, a fact that has
been proven by recent studies.
Therefore, in order to understand
Brazil’s success in the sector,
we must move away from the
traditional view that technology,
as a tool to generate and sustain
competitive advantage, is
something produced exclusively in
internal company R&D centers. The
process of innovation is adapted
to the country’s production
conditions and cannot be directly
compared to the processes in
large First World producers. Note
that the export performance of
the Brazilian agricultural industry
shows the success of this type of
innovative process.
The precise diagnosis of this
situation is fundamental to
guide research efforts in the
sector, as well as scientific and
technological development policies.
The model followed by Brazil has
been efficient in adapting itself
to the context of a developing
economy, but success in the future
requires greater advances in
productivity and innovation.
Results collected since the 1980s
show that the country is able to
do this, and competitive solutions
will continue to be proposed
both by research institutions and
companies.
Percentage of companies that innovated
between 2003 and 2005
Products and processes
Only organizational changes
60%
52
50%
42
40%
37
34
41
32 33
39
38
36
33
30%
32
31
28
25
20%
14
10%
Manufacturing Food
Beverages Tobacco
Leather
Wood
Cellulose
Paper
Source: Pintec (2005)
R&D spending as percentage of income in 2005
Spending on innovation
Internal R&D
6%
5.1
5%
4%
3%
2.8
2.8
1.7
2%
1%
1.8
1.4
0.6
0.1
Manufacturing Food
Source: Pintec (2005)
2.6
2.1
0.2
0.3
Beverages Tobacco
Leather
0.1
0.1
Wood
0.4
Cellulose
0.2
Paper
13
Brazil’s
Trajectory
Notable Advances
The country’s world agricultural
industry exports increased sharply
in recent years. In 1995, Brazil
occupied the 9th position in the
global ranking, responsible for less
than 3% of world exports. In 2005,
the last year with complete data,
Brazil’s share had increased to
4.8%, placing it in 4th position.
and more than double the world
average of 4.4%.
This performance was sustained
by an agricultural industry export
growth rate of 10.2% per year on
average during the period. This
was the largest growth rate among
the principal players in the market
But does this allow us to call the
Brazilian agricultural industry
competitive? Is this level of
competitiveness sustainable?
In the economics literature, the
The 20 largest agricultural exporters:
market share and annual growth, 1995-2005
(%) of world market
1995
Country
United States
France
Netherlands
Brazil
Spain
Italy
Canada
Australia
China
Argentina
Mexico
Ireland
India
Turkey
Ukraine
Chile
South Africa
Russia
Greece
Colombia
Source: FAOStat
1
2
3
9
8
5
6
7
4
10
12
11
13
14
19
18
17
20
16
15
14.0%
8.0%
6.9%
2.8%
2.9%
3.4%
3.2%
3.0%
3.6%
2.3%
1.4%
1.9%
1.1%
1.1%
0.5%
0.5%
0.7%
0.5%
0.8%
0.8%
2005
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
10.2%
7.4%
6.8%
4.8%
3.9%
3.9%
3.7%
3.3%
3.0%
2.5%
1.8%
1.6%
1.2%
1.1%
0.7%
0.7%
0.7%
0.6%
0.6%
0.6%
Average annual growth (%)
1.2%
3.5%
4.3%
10.2%
7.3%
5.7%
6.0%
5.5%
2.8%
5.0%
7.0%
2.9%
5.3%
4.7%
8.8%
8.5%
4.2%
7.6%
1.4%
0.9%
14 SUSTAINABLE BRAZIL BRAZIL’S PERSPECTIVES IN THE AGRICULTURAL INDUSTRY
discussion of a precise definition
of competitiveness is vast
and sometimes inconclusive.
Recently, a practical approach to
the question has been adopted,
defining competitiveness, both
in a sector and of each company
individually, as the ability to
attain, and sustainability and
profitably maintain market share.
The performance of the Brazilian
agricultural industry clearly
reveals a marked presence in the
international markets.
In recent years, performance has
not been tied to specific economic
policies, as occurred in the 1980s
with the large devaluations of the
national currency and the abundant
supply of official credits. From
1995-2005, there were important
changes in economic policy and,
especially after 2003, a currency
valuation process has taken place
without interrupting the increase in
the Brazilian share.
Opportunities and
Challenges
The dynamics of international
food and agricultural raw material
markets is marked by two trends,
based both on the needs of
consumers in the developed
world and by the large increase
in consumption in developing
countries.
The appearance of new food
consumption habits -- due to
the growing concerns related
to nutritional aspects and the
greater awareness of consumers of
sustained use of natural resources
-- is the driver of this market in
developed countries. In poorer
countries, the trend is different.
The rapid growth of the average
family income in economies with
large populations, such as China
and India, has resulted in large
numbers of new consumers,
a process also observed in
Brazil, both in poorer regions
like the Northeast and on the
periphery of large metropolises
in the Southeast. These
new consumers frequently
prefer food products with a
higher level of processing,
to the detriment of natural
items. As a consequence of
this process, the agricultural
industry product market is not
only expanding, but changing
qualitatively.
In terms of supply, an increase
in efforts towards efficiency
and sustained competitiveness
through technology is strategic.
This has been the response of
agricultural industry companies
to the new demand trends,
at the scale and standards
demanded by the international
market. Technology has entered
the agricultural industry chain
in different segments, including
biotechnology, generating
strategic inputs such as
altered seeds, and information
technology and methods
for company and supply
chain management, which
are essential to distribution
efficiency. In various situations,
the adoption of technical
innovations is an explicit
requirement to entering various
food and agricultural raw
material markets.
15
From the point of view of the
Brazilian agricultural industry and
that of developing countries in
general, add to these trends a third
factor: protectionist trade barriers.
Various agricultural industry
products, from beef to fuel alcohol,
are faced with various barriers in
very important markets such as the
United States, Japan and Europe.
The response of Brazilian
companies to the challenges and
the current dynamic in the food
and agricultural raw material
market has been adequate. Its
advance in the international
markets is proof of this. However,
the protectionist policies of
developed countries could
represent an obstacle to free
competition in the coming decades.
The establishment of more
obstacles to agricultural industry
product trade, for example, would
mean a setback in relation to the
general objective of balanced world
trade enabling underdeveloped
and developing countries to enter
the world scenario under better
conditions.
New elements appear in the
international debate on the flow of
goods from agribusiness. Products
that previously belonged to the
food industry are now seen as
clean, renewable energy sources
in the form of biofuels, a fact that
alters their strategic role both
for producing and consuming
countries, and the energy question
becomes more important as
awareness of the environmental
problem grows.
The increase in agricultural
products seen recently shows
how controversial the subject
is. The use of areas traditionally
dedicated to food production
may influence the world supply of
food. But the pressure for clean,
renewable energy alternatives is
a determining factor in the fight
against developed countries’
agricultural trade barriers,
and could open markets for
primary products from third
world economies. In this context,
Brazil’s position is very favorable
because it has average agricultural
productivity and fertilizer use
levels. Thus, an increase in
the supply of biofuels does not
necessarily represent a threat to
food production, since the earth’s
productivity can be increased
relatively easily.
Reference
Assumptions
As we have seen, the question of
the sustained competitiveness of
Brazilian agribusiness rests on
two pillars that are fundamental
for the creation of the scenarios:
the continuity in efficiency gains
throughout the chain and the
increased access to large, dynamic
markets. In relation to efficiency,
Brazilian agriculture and livestock
raising is seeing a progressive rise
in investment rate similar to that
of the overall economy through
2030, increasing its level of
mechanization, use of information
technology and improvements
in production and distribution
methods.
16 SUSTAINABLE BRAZIL BRAZIL’S PERSPECTIVES IN THE AGRICULTURAL INDUSTRY
If the agricultural industry
maintains its innovation through
technological outsourcing, it will
continue to increase its share of
the added value of the agribusiness
chain, responding satisfactorily
both to the growing environmental
and nutritional demands of
consumers in developed countries
and the growing volumes of
food demanded by developing
countries. The increased awareness
of the environmental dynamic
will continue to highlight the
importance of alternative sources
of energy and the non-predatory
production of food. The dynamism
revealed by the position of the
Brazilian agricultural industry
in international markets in the
last decade is a basis for these
affirmations.
In contrast, protectionism
should be treated with relative
conservatism. The reference
hypothesis is that current trade
barrier levels, whether explicit or
not, will lower slowly during the
period of our projections. There
are no elements in the current
international negotiation dynamics
that would allow us to be more
optimistic.
In the projections presented below,
whether or not Brazil is able
to sustain agricultural industry
competitiveness in international
markets will depend much more
on increases in productivity
throughout the chain than greater
access to markets. And, even
if the conservative hypothesis
on the degree of protectionism
is unnecessary due to greater
openness, access to these markets
would be expected to benefit
the large players in a relatively
homogeneous way.
17
The Market in 2030
Large Importers
Between 1990 and 2007, world
food imports grew 7.8%, or 0.4%
per year. Growth was much greater
in countries with large populations
and rapid economic growth, like
India (5.9%) and China (3.4%).
In absolute terms, however, these
countries are responsible for
relatively low percentages of total
food imports: 1.2% and 3.6%,
respectively, in 2007. Currently,
the large importers are the
United States (18.7%) and Japan
(16.5%), followed at a distance
by the United Kingdom (6.7%),
Germany (6.4%) and France
(5.8%).
On the horizon through 2030,
projections for world imports
of food and agricultural raw
materials, based on the reference
scenario in this study, indicate a
loss of share relative to most rich
countries except the United States,
accompanied by a gain by countries
like China, India and Brazil.
The profile of the agricultural raw
materials market is different from
that of food. From 1990 through
2007, world imports fell 1.4%
annually. In Brazil, these imports
fell 2.2% annually. Countries such
as China and India had inverse
trends, with an annual growth of
1.5% and 1% during the period,
respectively. The concentration in
the international market is even
greater than in the case of food.
The United States, Japan and
China together were responsible
for almost 50% of imports of
agricultural raw materials in 2007.
According to the reference
scenario, these market shares
should change in the coming
decades. The United States is
expected to maintain its current
share of 23%. Japan’s share,
however, should decrease from
12.5% to 9.5%, typical of most
rich countries. China’s share will
increase drastically, from 12%
to 17.4% of world imports of
agricultural raw materials.
There are two general trends in the
international market of agricultural
industry products:
Food imports should grow
more in populous, emerging
countries -- notably China and
India -- that, through 2030,
will see increases in per capita
income and the number of new
consumers. However, in absolute
terms, markets in rich countries
like the United States and Japan
will remain important. Even
rapid Chinese growth from 2007
to 2030 will not cause it to
pass countries like Italy and
it will remain in 7th position
in the ranking of the largest
importers.
In the agricultural raw
materials market, although
the performance of poorer
countries is still more
favorable, the United States
will maintain a share of almost
one forth of world imports.
China, however, will rise to
second position in the ranking,
responsible for 17.5% of the
demand on the international
market.
Thus, companies in the market
must be prepared to supply
emerging countries without
neglecting the large markets
of the rich countries, which
will continue to be important
importers, especially of highvalue-added products.
Distinct Dynamics
Having presented the general
outline of the scenario through
2030, which factors explain the
contrast between the dynamics of
the international markets of food
and agricultural raw materials?
As a rule, imports of agricultural
raw materials such as leather,
World Map of
BRAZILIAN AGRICULTURAL
INDUSTRY EXPORTS
Country
United States
Mexico
1.5%
1.9%
1.1%
1.6%
1.8%
2.2%
Nafta
1.5%
The Largest Importers of Brazilian Agricultural
Industry Products in 2007 and 2030, in US$ millions
2007
Country
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
United States
Belgium**
Russia
Italy
France
Germany
China
Great Britain
Iran
Japan
South Korea
Spain
South Africa
Canada
Nigeria
Malaysia
Argentina
Indonesia
Switzerland
Thailand
US$
millions*
3,815.7
1,729.4
1,325.3
1,303.0
1,172.9
915.7
900.6
819.8
787.7
674.1
413.2
400.4
369.1
361.6
356.9
347.4
305.3
304.9
273.9
245.2
Source: Getulio Vargas Foundation
(*) At 2007 prices.
(**) Gateway for the European Union
2030
Country
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
United States
China
Belgium**
Italy
Russia
France
Germany
Great Britain
Iran
Japan
South Korea
Malaysia
Indonesia
Spain
South Africa
Nigeria
Canada
Thailand
Argentina
Switzerland
1.1%
1.8%
Central America
and the
Caribbean
2.0%
US$
millions*
5,377.4
2,145.7
2,067.9
1,842.8
1,554.8
1,498.4
1,070.0
1,033.6
944.1
814.6
644.1
516.0
492.8
492.7
455.3
454.3
431.0
414.1
389.9
373.1
2.1%
0.2%
South
America
1.2%
1.3%
1.0%
Country
Argentina
Chile
Venezuela
1.1%
1.3%
1.2%
1.0%
1.4%
1.2%
1.4%
0.5%
0.8%
Average annual growth through 2030*
World
1.3%
1.0%
2.0%
Growth of agricultural industry exports
Growth of food exports
Growth of agricultural raw material exports
* At 2005 prices
Europe
1.0%
0.8%
1.3%
Middle East and
North Africa
Country
Great Britain
France
Portugal
Spain
Germany
Russia
1.0%
1.1%
0.5%
0.9%
0.7%
0.7%
1.0%
1.2%
0.5%
1.1%
0.7%
0.7%
0.8%
0.8%
0.4%
0.7%
0.6%
0.4%
Country
Japan
China
South Korea
India
Australia
0.8%
3.8%
1.9%
0.6%
1.6%
0.8%
0.8%
1.5%
0.3%
1.6%
0.9%
5.1%
2.7%
2.8%
2.1%
0.8%
Asia and Oceania
2.2%
1.1%
3.8%
0.8%
0.8%
Annual % Growth of Brazilian
Agricultural Industry Exports, 2007-2030
3.3
2.4
2.1
Sub-Saharan
Africa
2.0
1.6
1.0%
1.2
0.8
0.8
0.7
0.6
0.4
0.2
0.2
m
d
Ca
s
(a
ca
ve
o
ra
an
ge
d
de
)
riv
at
ive
Su
s
ga
C
ra e
nd rea
Ve
l
ge probak s
du er
To tab
ct y
ba les
s
cc a
o nd
an fr
ui
d
pr tob ts
od ac
Fa uc co
ts ts
an
d
oi
ls
Ce
Fu
llu
ra
lo
se
Ag nd
ric lea
ul the
m tura r
W ate l r
oo ri aw
d als
pr
od
uc
ts
t
1.0
ite
d
M
ea
Fo
o
fo
o
us
Va
rio
Al
co
h
ol
ic
be
ve
r
An age
s
im
al
fe
ed
1.0%
1.9%
1.0
Source: Getulio Vargas Foundation
20 SUSTAINABLE BRAZIL BRAZIL’S PERSPECTIVES IN THE AGRICULTURAL INDUSTRY
The 20 largest importers
in 2007 and in 2030
Food
2007
Country
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
United States
Japan
Great Britain
Germany
France
Italy
Russia
Spain
China
Canada
Netherlands
Mexico
Brazil
South Korea
Australia
Denmark
India
Belgium
Sweden
Greece
2030
US$
billions
537.4
475.1
191.4
183.9
168.2
151.9
126.2
107.5
80.4
64.5
61.8
48.2
42.3
36.4
35.8
29.8
28.8
28.6
26.9
26.4
Country
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
United States
Japan
Great Britain
France
Germany
Italy
China
Russia
Spain
Canada
Mexico
Brazil
Netherlands
Australia
India
South Korea
Indonesia
Denmark
Egypt
Greece
US$
billions
720.3
467.7
222.5
192.3
187.9
160.8
154.4
135.7
125.0
82.6
74.4
67.0
66.9
49.9
47.8
45.9
36.0
33.5
33.3
32.8
Agricultural goods and raw materials
2007
Country
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
United States
Japan
China
Italy
Germany
France
Great Britain
India
South Korea
Spain
Brazil
Canada
Mexico
Turkey
Netherlands
Indonesia
Russia
Australia
Austria
Denmark
2030
US$
billions
169.1
91.1
87.8
46.3
39.8
31.5
30.0
17.5
15.9
15.8
14.2
14.0
11.3
10.7
10.4
10.3
7.8
6.8
6.8
5.8
Source: Getulio Vargas Foundation
Country
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
United States
China
Japan
Italy
Germany
France
Great Britain
India
Brazil
South Korea
Spain
Canada
Mexico
Turkey
Indonesia
Netherlands
Bangladesh
Australia
Pakistan
Russia
US$
billions
226.6
168.7
89.7
49.0
40.7
36.1
34.9
29.0
22.6
20.1
18.3
17.9
17.5
16.8
15.5
11.3
10.6
9.5
8.8
8.4
Worldwide family consumption should grow
on average 2.8% yearly through 2030,
compared to an increase in food imports of
only 0.9% annually.
cellulose and alcohol should rise
more than food. This relatively
favorable performance is explained
by two factors.
also generate growing demand for
processed food, energy, and for
packaging and products from the
graphics industry.
Firstly, we assumed a moderate
reduction in trade barriers in
rich countries, a fact that tends
to benefit some of the more
important segments in this
market, driving world trade.
Additionally, the global demand
for these products responds
slower to an increase in income,
especially in poorer countries. In
these poorer economies, growth
should occur with increased family
income and and higher degrees
of urbanization. These processes
The growth rate of real salaries
from 2007 through 2030 will be
slower in countries like Japan
(1.1%) and greater in countries
like Brazil (2.5%), South Korea
(2.8%) and China (6.2%).
The apparent exception to the rule
is the United States, whose annual
salary growth rate will remain high
in relation to the standard of rich
countries (1.6% annually), without
the demand for agricultural raw
materials growing faster than the
world average through 2030. This
situation can be explained by the
lack of increases in urbanization
and changes in consumption habits
seen in developing countries.
It is relatively easy to understand
the reasons why world food
imports are expected to grow
slower than family consumption.
Food consumption grows less
strongly with increases in income
as families increase their standard
of living. This process generates
fewer impacts on the demand for
food than on general consumption
levels. As a result of this trend,
family consumption should grow
worldwide at 2.8% per year from
The market for food, beverages and tobacco in 2007 and 2030
35%
2007
2030
By income class, (%) of total
30%
25%
29.0%
26.9%
20%
25.7%
21.7%
21.6%
19.6%
15%
10%
13.0%
12.5%
5%
12.5%
6.7%
Income under
R$ 1,000
From R$ 1,000
to R$ 2,000
From R$ 2,000
to R$ 4,000
Source: Getulio Vargas Foundation (*) At 2007 prices
From R$ 4,000
to R$ 8,000
From R$ 8,000
to R$ 16,000
6.8%
2.4%
From R$ 16,000
to R$ 32,000
0.3%
1.3%
More than
R$ 32,000
22 SUSTAINABLE BRAZIL BRAZIL’S PERSPECTIVES IN THE AGRICULTURAL INDUSTRY
World Import Map
Annual growth through 2030
Region/Country
The agricultural
industry
Europe
Great Britain
France
Portugal
Spain
Germany
Russia
NAFTA
United States
Mexico
Central America and the Caribbean
South America
Argentina
Brazil
Chile
Venezuela
Asia and Oceania
Japan
China
South Korea
India
Australia
Sub-Saharan Africa
Middle East and North Africa
World
0.4%
0.6%
0.6%
0.2%
0.6%
0.0%
0.3%
1.2%
1.4%
1.8%
1.6%
1.9%
1.5%
2.0%
1.7%
1.9%
1.2%
-0.1%
3.1%
0.5%
2.9%
1.3%
2.4%
1.7%
1.0%
Food
0.5%
0.7%
0.6%
0.2%
0.7%
0.1%
0.3%
1.3%
1.3%
1.9%
1.5%
1.9%
1.5%
2.0%
1.8%
1.9%
0.9%
-0.1%
2.9%
1.0%
2.2%
1.4%
2.3%
1.6%
1.0%
Agricultural raw
materials
0.3%
0.5%
0.6%
0.1%
0.1%
-0.3%
-0.4%
0.7%
0.6%
1.6%
1.8%
1.9%
1.6%
2.0%
1.3%
1.8%
2.1%
-0.5%
3.3%
-1.1%
3.8%
0.4%
3.1%
2.2%
1.2%
Source: Getulio Vargas Foundation
2007 to 2030, but food imports
should grow at about 1% annually.
In Brazil, despite the projected
increase in the GDP (4.0% yearly)
and in food consumption (2.9%
yearly), food imports will increase
at lower rates (2.0% yearly) as a
result of the good performance of
domestic agricultural and livestock
production and the agricultural
industry.
Domestic Demand
The tendency of the demand
for food increasing slower than
increases in income can be seen on
a smaller scale in Brazil since there
are income ranges in which food
consumption does not adequately
satisfy nutritional necessities.
Through 2030, we estimate that
the Brazilian GDP will increase
at a rate of 4.0% annually and
average income at 3.1% annually.
At the same time, worldwide family
consumption will grow 3.8% yearly.
Food consumption is projected to
increase only 3.0% annually (2.5%
for unprocessed foods and 3.1% for
processed food). This means that,
taking into account the country
and its various income ranges,
for each 10% increase in the GDP,
food consumption should increase
7.5%. Note, however, that these
estimates hide large differences
when products and income ranges
are analyzed in detail.
For example, considering the
worldwide consumption of food
for all family income ranges, for
each 10% increase in income, the
demand for sugar increases only
0.7%. However, the demand for
beef increases 6.7% in the same
situation. This is because increases
in income change family food
consumption habits.
The reference scenario estimates
that the lowest family income
ranges (up to R$ 1,000 and from
R$ 1,000 to R$ 2,000, in 2007
values) will slowly rise into average
total consumption levels due to the
slow increase in family income. The
large consumption growth rates of
the intermediate ranges, projected
through 2030, should drive a
standard of food consumption
more concentrated on protein, to
the detriment of carbohydrates
and fats. The domestic demand
for protein-rich foods will grow
at slower rates. There will be
important growth in per capita
consumption of items such as
23
ham (2.8% annually on average
through 2030), cheese (2.3%)
and quality beef (2.1%). Based
on the average population growth
during the period (0.9% yearly),
total demand growth will reach
3.7% for ham, 3.3% for cheese and
3.1% for beef.
Special care must be taken when
analyzing milk. In Brazil, powdered
milk is considered inferior, that
is, its consumption is inversely
related to income variations. This
is explained by the fact that the
poorest families are the largest
consumers of powered milk. This
is both a result of welfare policies,
which prioritize distribution of
this item, and because poorer,
larger families tend to dilute the
product. Thus, consumption of
powdered milk will not change
much in Brazil in the coming years.
On the contrary, per capita
consumption of pasteurized milk
should increase 1.8% yearly
through 2030. Given the increase
in population, the total demand
for this item should grow at an
annual rate of 2.8%.
of economic growth. In the
modified scenario, an average
GDP growth rate of 4.6% per
year from 2008 through 2030 is
assumed. This increased economic
expansion implies an annual food
consumption growth rate of 3.2%.
Per capita consumption of
energy foods -- that is, rich in
carbohydrates -- should increase
slowly, with annual growth rates
of 0.8% for wheat flour, 0.7% for
pasta, 0.5% for rice and 0.2% for
sugar. The total demand for rice
will grow at 1.6% annually, wheat
flour 1.8%, pasta 1.7% and sugar
1.2%.
This rate, slightly higher than
that projected in the reference
scenario, would result in
additional consumption of R$ 6
billion in 2030. The effect of a
larger income growth rate will
be seen more strongly in the
processed food market.
As seen in the second publication
in this series, institutional
improvements and improvements
in training lead to sustained
development with higher levels
Brazil in two scenarios, annual rates
2007 to 2030
Reference
scenario
Modified
scenario
Economic growth
4.0%
4.6%
Consumption of food and beverages
2.9%
3.1%
Consumption of unprocessed food
2.5%
2.7%
Consumption of processed food
3.1%
3.3%
Consumption of beverages
2.6%
2.8%
Consumption of products
2.5%
2.7%
Indicators
Source: Getulio Vargas Foundation
24 SUSTAINABLE BRAZIL BRAZIL’S PERSPECTIVES IN THE AGRICULTURAL INDUSTRY
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Campinas | SP
Galleria Corporate
Av. Dr. Carlos Grimaldi, 1.701 - 3° andar 3A
Fazenda São Quirino - ZIP Code: 13091-908
+55 19 2117 6450
Rio de Janeiro | RJ
Centro Empresarial Botafogo
Praia de Botafogo, 300 - 13º andar
Botafogo - ZIP Code: 22250-040
+55 21 2109 1400
Rua do Ouvidor, 88 - 6º andar
Centro - ZIP Code: 20040-030
+55 21 2222 3100
Praia de Botafogo, 228, Ala B - 13º andar
Botafogo - ZIP Code: 22359-900
+55 21 3736 9500
Belo Horizonte | MG
Edifício Asamar
R. Paraíba, 1.000 - 10° andar
Funcionários - ZIP Code: 30130-141
+55 31 3055 7750
Rua Bernardo Guimarães, 245 - 17º andar
Funcionários - ZIP Code: 30140-080
+55 31 3508 7200
Blumenau | SC
Edifício California Center
R. Dr. Amadeu da Luz, 100
8° andar, conjunto 801
Centro
ZIP Code: 89010-160
+55 47 2123 7600
Brasília | DF
Edifício Brasil 21
Setor Hoteleiro Sul - Quadra 06
conjunto A, bloco A - 1º andar - sala 105
ZIP Code: 70316-106
+55 61 2104 0100
Goiânia | GO
Av. República do Líbano, 1551
4º andar, sala 402
Setor Oeste - ZIP Code: 74125-125
+55 62 3212 0210
Curitiba | PR
Condomínio Centro Século XXI
R. Visconde de Nacar, 1.440 - 14º andar
Centro - ZIP Code: 80410-201
+55 41 3593 0700
Porto Alegre | RS
Centro Empresarial Mostardeiro
Av. Mostardeiro, 322 - 10º andar
Moinhos de Vento - ZIP Code: 90430-000
+55 51 2104 2050
Recife | PE
Edifício Empresarial Center III
R. Antônio Lumack do Monte, 128 - 14° andar
Boa Viagem - ZIP Code: 51020-350
+55 81 3092 8300
Salvador | BA
Edifício Guimarães Trade
Av. Tancredo Neves, 1.189 - 17° andar
Pituba - ZIP Code: 41820-021
+55 71 3496 3500
Rua da Alfazema, 761 - 2º andar
Salas 201, 202 e 210
Caminho das Árvores - ZIP Code: 41820-710
+55 71 2203 4350
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