Crop Producers in Brazil Lose US$ 4.34 Billion with U.S. Subsidies
Brasília, March 26, 2014- The president of the Confederation of Agriculture and Livestock of Brazil (CNA), Senator Katia Abreu, announced on Wednesday the creation of an observatory to monitor the process of implementation of both the U.S. Farm Bill and the Common Agricultural Policy (CAP) of the European Union. There are concerns that U.S. subsidies could cause damage to farmers, compromising the performance of Brazilian agriculture abroad. The recently approved policies by the U.S. will result in a loss of US$ 4.34 billion for Brazilian exporters of corn, soy, and cotton between 2014 and 2018.
CNA projects that Brazilian soy producers will lose US$ 2.5 billion in exports, based on an annual average annual loss of US$ 480 million between 2014 and 2018. American incentives will result in a 3% decline in the price of grain. For corn, CNA estimates a total US$ 1.5 billion loss with an annual impact of US$ 280 million and a price reduction of 4%. Brazilian Cotton producers will lose a total of US$ 340 million with an annual loss of US$ 70 million and will experience a 4% decrease in price.
The numbers are part of the study “Agricultural Policy of the United States and the European Union: Impact on Brazilian Agribusiness,” prepared by Agroicone Consulting at the request of CNA. It is the first formal position of agribusiness on incentives since the WTO (World Trade Organization) cotton dispute in 2010.
The unpublished research was presented on Wednesday at CNA headquarters in Brasilia, where a seminar attended by experts and officials from 14 countries was held. In addition, both Neri Geller, the Minister of Agriculture, Livestock and Supply (MAPA) and Paulo Mesquita, director of the Economic Department of the Ministry of Foreign Affairs were present.
Other data indicators also worry CNA. The new U.S. Farm Bill will allow grants totaling US$ 64.5 billion to U.S. producers for the three commodities. ”The crop production sector [in Brazil] is outraged by the size of these harmful subsidies, which can both expand the production area in the United States and cause a depression of prices in the international market,” said Senator Abreu.
The president of the International Relations Committee of CNA, Eduardo Riedel, says the U.S. law “may affect soybean exports from Brazil.” This is the first time the crop has entered the American soybean subsidy program. In recent years, U.S. producers of soybeans – the main export item in the agenda of Brazil – received no subsidies from Washington, but are now covered with political support in the package approved in February. Brazilian exports of soybeans, meal and oil generated US$ 30.96 billion in 2013, surpassing the performance of oil and derivatives (US$ 22.37 billion). The aid comes as Brazil seeks to overcome U.S. production to become the largest producer of the grain. The official expectation is a harvest of 854 million tons, which is a reduced forecast from earlier this year at 4.6 million tons. He also stressed the possible damages that the policy of income insurance may cause to other products, such as corn. The study points to the possibility of a decline of 4% in the international price of grain.
Riedel endorsed the president of CNA for private initiative. Executive and Legislative Brazilians work jointly in assessing such impacts . The idea has been accepted by both the Ministry of Agriculture and Ministry of Foreign Affairs and is represented by the Director of the Economic Department and the chairman of the Agriculture and Parliamentary Front (APF), Luiz Carlos Heinze (PP – RS). Ambassador Clodoaldo Hugueney, a consultant at CNA, was also one of the coordinators of the debate.
Another one of the changes highlighted by the president of CNA is the transfer of direct payments for agricultural insurance. This will keep the distorted effect of previous programs because the insurance guarantees income to the producer at any price point . “It is clear that Americans are not seeking efficiency and productivity. They are rewarding only the amount,” says Senator Abreu. This perception is shared by Mark Langevin, the International Relations chairperson of the Brazilian Association of Cotton Producers (Abrapa) in the United States. For him, the new law does not “bring great stimulus to increase crop yields.”
According to the director of Agroicone, André Nassar, who led the study, ”even with the remunerative prices, subsidies reduce the risk to producers and will respond to government incentives.” He says that the impact on corn and soy were big surprises for Brazil. Horrys Fiança, the agricultural attaché of the Embassy of Brazil in Washington, believes that despite the 2 % cut in the budget, the new farm bill should implement greater spending to direct payments of subsidies to U.S. producers, due to the adjustment of minimum prices.
Although the U.S. Farm Bill dominates the debates, the European Common Agricultural Policy (CAP) was also discussed by the experts. The representative of CNA in Brussels, Maria Almeida, said that Brazil needs to pay attention to the issue of sugar. Commodity exports are limited to 1.3 million tons / year without payment of benefit to foreign sales . However, export quotas will cease to exist by 2017, which could cause Europe to further increase their exports and to grant subsidies to their exporters, impacting the international market.