March 24, 2006

Brazil's agribusiness exports seen slowing down

Stable international commodity prices may not be enough to boost Brazilian agribusiness exports, said a new report by economists at the University of Sao Paulo.

The university's Centre for Applied Advanced Economic Studies (Cepea), said Wednesday (Mar 22) that a weak US dollar in relation to the local currency was making agribusiness less attractive in Brazil, despite global demand for many of Brazil's commodities, from beef to ethanol.

Cepea created an index two months ago for measuring the strength of agricultural commodity exports as a means for gauging the attractiveness of agribusiness investments.

From January 2005 to January 2006, international prices measured by Cepea's commodity index rose 11.23 percent, but agriculture commodity export volume rose much less, by 4 percent in January 2006, compared with January 2005.

January 2006 prices rose by 0.41 percent over December's prices. But actual export volume fell by 18.9 percent, Cepea reported, in comparison to December. December volume had already fallen by 2.2 percent over November, and November was down about 1 percent in comparison to October.

Overall export volume has been falling since September 2005. The dollar was as high as 2.39 real in early September, but fell considerably all month. The dollar traded Thursday at 2.15 real. Cepea measures a wide range of Brazilian agriculture exports and not just the major traded items like coffee and soybeans.

Brazilian coffee and soy exporters have been expressing concern of a drop in export revenue since December because of an unfavourable exchange rate. Both coffee and soy industry estimates expect increased export volume in 2006.