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The year 2024 has only just begun, but comments and expectations about food prices and how they might impact the general consumer price level, officially measured by the IPCA (National Consumer Price Index), are already mounting. And there are some points of attention that foster such perspectives, namely the climatic issue.
The El Niño phenomenon that has been affecting Brazil’s climate since the second half of 2023 has been classified by the World Meteorological Organization – WMO (2024) as one of the five strongest phenomena. El Niño has boosted temperatures, and the outlook is that it loses its strength from April onwards, according to the WMO (2024).
In addition to El Niño, global climate change due to the greenhouse effect, which has raised average temperatures, is a reality and one of its most relevant impacts is on agricultural production, which, depending on the crop and region, can mean a negative result in productivity, which directly influences the rise in prices of agricultural products, as several academic studies, such as that by Dhifaoui et al. (2023), demonstrate and quantify.
Climatic conditions have been increasingly proving to be one of the main determinants of agricultural supply, but this is an item outside the producer’s control, which poses a major challenge, both for planning and for maintaining minimum productivity that guarantees the continuity of activities. For the consumer, climate change can lead to a smaller supply of products, which tends to materialize at higher prices. For the producer, the concern is also about the increase in costs, as shown by Grigorieva, Livenets, and Stelmakh (2023), either because of the increased use of pesticides, which are necessary to combat the pests that appear with the rise in temperatures, the need to implement and apply new techniques, the need to hire insurance, among others.
Looking from the consumer’s perspective, in terms of the general level of prices in the economy, the weight that food prices represent is widely known. In 2021 and 2022, the inflation target set for the country was not met, with IPCA remaining above the ceiling, and in both years, with a significant contribution from the food and beverages group, with food inflation reaching 7.94% in 2021, which was not one of the largest, since, in that period, the price of transport and housing also accumulated significant advances, 21.03% and 13.05%, respectively, according to IBGE (2024). In 2022, the food and beverage group had the second-highest cumulative increase in the year (11.64%) behind the clothing group, which rose 18.02% in the year (IBGE, 2024).
In 2023, the inflation target was met, and the group of food products varied at a much lower level than in previous years (1.03% in the year). The subgroup that includes products related to household food closed 2023 with an accumulated drop of 0.48%, which had not been verified since 2017, largely due to increased supply and also the cooling of input costs, after the increases caused by the pandemic and the start of the conflict between Russia and Ukraine. As a result, compliance with the 2023 inflation target was achieved with a strong contribution from food prices.
Now, considering only the first two months of 2024, the food and beverages group has accumulated an increase of 2.34%, whereas for the same period in 2023, the rise was 0.76%, according to IBGE (2024). The subgroup for food at home accumulates, in the same period, a rise of 2.93%, bringing concerns about how this price group may move throughout the rest of the year, considering that, at least in part, the January and February numbers reflect El Niño implications.
Potatoes, which are the most consumed product in the tuberous vegetables group, stood out in the February 2024 inflation, with an increase of 6.79%, largely because of the delay in planting due to the effects of El Niño. However, according to information from Hortifruti/Cepea (2024), there is an expectation that supply will increase in March due to the wet weather and expected rainfall. This illustrates the fact that each agricultural product has its own specific characteristics, as well as the ideal climate for planting and harvesting. Therefore, when it comes to food prices in the aggregate, it is always important to bear in mind that it is formed by several particularities, which must be taken into account.
Furthermore, it should be emphasized that concern about food prices goes far beyond the purely economic issue of achieving inflation targets and how this might reflect on the country’s monetary policy. Worrying about food prices, especially at the consumer level, also means worrying about a population’s food security, which basically corresponds to guaranteeing economic, physical, social, permanent, and sufficient access to nutritious food, according to FAO (2024). In other words, when discussing food prices, it should also be noted how rising prices can make it difficult for the poorest people in particular to access adequate food.
Data from the IBGE (2020) indicates a reduction of more than 50% in Brazilians’ consumption of staple food products, such as rice and beans, over 16 years and attributes this reduction mainly to the increase in prices of such products and the growing consumption of ultra-processed products. Evidently, the near stagnation of per capita income in Brazil has a strong role in restricting purchasing power, forcing the population to look for less expensive alternatives to eat. This stagnation is taking place against a backdrop of stable poverty levels for a third of the population. Specifically, circa 11% of the population lives on a per capita income of up to ¼ of the minimum wage; 30% live on less than ½ of the minimum wage. In short, roughly 60% of the Brazilian population lives on up to one minimum wage per capita. This scenario of almost stagnant domestic demand for certain products (such as rice and beans, for example) – due to very low incomes – does not favor the systematic expansion of production (using up-to-date technologies and taking advantage of economies of scale, as it is observed for the production of exportable products). Therefore, this production grows at insufficient rates (from a nutritional point of view) and is at the mercy of the climate and the occurrence of pests and diseases in crops.
In any case, when it comes to food, especially food prices, the scope is much wider than purely economic, especially in a society with a high level of poverty, as it is the case in Brazil. Until it reaches the consumer’s table, there are many factors that play a role in price formation, some of which are easier to measure and predict, while others, such as the climate issue and its implications, are more difficult.
Therefore, any forecast about how prices of the large and diverse group of food-related products will behave throughout 2024 is complex and inaccurate. What can be said is that it is important – in a country with structural characteristics such as Brazil – to monitor price indicators, paying close attention to the features of each product, without losing sight of events in the economic scenario, climatic events, geopolitical issues, among other factors that can directly or indirectly influence food prices. In other words, it’s not a trivial issue.
References
DHIFAOUI, Z.; KHALFAOUI, JABEUR, S. B. ABEDIN, M. Z. Exploring the effect of climate risk on agricultural and food stock prices: Fresh evidence from EMD-Based variable-lag transfer entropy analysis. Journal of Environmental Management. V. 326, part B, 2023. Disponível em: < https://www.sciencedirect.com/science/article/pii/S0301479722023623>.
FAO. Disponível em: < https://www.fao.org/3/w3613p/w3613p00.htm>.
GRIGORIEVA, E.; LIVENETS, A.; STELMAKH, E. Adaptation of Agriculture to Climate Change: A Scoping Review. Climate, 11, 2023. Disponível em: https://doi.org/10.3390/ cli11100202
HORTIFRUTI/CEPEA. Revista Hortifruti Brasil. Ano 22, n.242, 2024. Disponível em:< https://www.hfbrasil.org.br/br/revista.aspx>.
INSTITUTO BRASILEIRO DE GEOGRAFIA E ESTATÍSTICA – IBGE. Presença do feijão nos domicílios brasileiros cai pela metade em 15 anos. 2020. Disponível em:< https://agenciadenoticias.ibge.gov.br/agencia-noticias/2012-agencia-de-noticias/noticias/27301-presenca-do-feijao-nos-domicilios-brasileiros-cai-pela-metade-em-15-anos>.
INSTITUTO BRASILEIRO DE GEOGRAFIA E ESTATÍSTICA – IBGE. Sistema
Nacional de Índices de Preços ao Consumidor – SNIPC. IPCA. 2024. Disponível em:< https://sidra.ibge.gov.br/pesquisa/snipc/ipca/quadros/brasil/fevereiro-2024>.
WORLD METEOROLOGICAL ORGANIZATION – WMO. El Niño weakens but impacts continue. 2024. Disponível em:< https://wmo.int/media/news/el-nino-weakens-impacts-continue>.
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Fonte: Cepea