Is Brazilian agriculture adding value to its exports?

Since the 2000s, Brazilian agribusiness has been growing rapidly in terms of exports. Between 2000 and 2023, agricultural exports grew by an average of almost 10% per year. This phenomenon was largely driven by increased demand from Asia, especially China, in parallel with increased Brazilian agricultural productivity, which increased the share of Brazilian agribusiness products in international trade.

When evaluating Brazilian agricultural exports by product profile, it is noted that Brazil has specialized in exports of commodities agricultural and agro-industrial products exported in large volumes with little differentiation and basically aimed at reprocessing and adding value abroad. Examples are the soybean and corn chains (exported basically in the form of grain), meat, forestry products, sugar, cotton and coffee, which represented in 2023 around 90% of Brazilian agribusiness exports in value (US$), according to data from Secex[1].

This fact is not necessarily negative - the production and export of commodities hold undeniable economic relevance for the country and are highly demanded and competitive in the world. However, the path towards products with greater added value and differentiation is something that should be followed to increase the participation of Brazilian products in the international market. Commodities are products whose prices are set in the international market under almost perfect competition, which exposes national producers to inherent risks, such as price fluctuations and extensive competition with global players. In addition, products that involve greater production steps or differentiation, as a rule, could generate more added value, more jobs and higher incomes within the country.

However, it is important to consider that developing more complex production chains is not a simple task. It involves additional processing, commercialization, distribution, differentiation and marketing costs, in addition to requiring a great deal of diplomatic effort and negotiations to expand access to target markets that normally protect domestically added value.

In order to measure the added value to Brazilian agricultural exports, a classification of agribusiness products was carried out based on classes of economic activities: (1) agriculture, (2) extractive industry (3) transformation industry and (4) other products. These classes are part of the ISIC (Standard Industrial Classification of All Economic Activities) classification, which divides global trade products into economic activities and levels of transformation. Furthermore, it follows a logic similar to the Aggregate Factor classification adopted by Secex in the past, which separated exported goods into basic, semi-manufactured and manufactured. For example, most products from agriculture (production “inside the farm gate”, without major processing steps) are classified as basic products, while most of the agribusiness processing of these products falls into the semi-manufactured and manufactured categories. Thus, the strategy of this study to identify the products with the highest added value is to compare the share of agribusiness exports between the categories of agriculture and manufacturing (agribusiness).

When evaluating global data, it can be seen that there are countries that have chosen to specialize in products with greater added value, such as China and countries in the European Union, while others, such as Brazil, the United States and Australia, have specialized in selling products with less differentiation. Furthermore, it can be seen that Brazilian agribusiness has not been able to change the profile of its exports over time.

In absolute terms, Brazilian agribusiness is the world's third largest exporter of both agricultural and agro-industrial products. However, if we consider only agribusiness products from the manufacturing industry, i.e., those with higher added value, Brazil falls to 4th place, with US$ 71,5 billion exported in 2023, as shown in the graph above. Between 2000 and 2023, Brazilian exports of these products grew at an average annual rate of 8,8%, a figure even higher than that of its global competitors.

In relative terms, however, there are major differences. When we consider the share of agro-industrial products in total agribusiness exports (considering major global players in the sector), the European Union tops the list, with a share of over 80%, along with China. Brazil is among the countries with the lowest share, approximately 46,6%. Furthermore, this share has been decreasing over time, a trend that is contrary to that observed in the countries of the European bloc, but in line with Australia and Ukraine, for example. In 2000, the share of these products was 69,1%, in 2010, 66,8%, revealing that the 2010s were decisive for the current characteristics of Brazilian agribusiness exports, since this percentage has fallen by almost 20 percentage points in the last thirteen years. Brazilian competitiveness in basic agricultural commodities becomes even clearer when one realizes that the average annual growth in exports of agricultural products was equal to 13,5%, in this period, significantly higher than that observed for agro-industrial products.

This result in agricultural exports follows a trend of reduction in the participation of the manufacturing industry, which occurs both in agribusiness and in the Brazilian economy as a whole. According to data from Cepea Esalq/USP, the participation of agribusiness in the gross domestic product (GDP) of agribusiness falls from 34% in 2000 to 23% in 2023, indicating lower relative growth of agribusiness compared to other segments that make up the sector's GDP[1].

These figures not only reveal a characteristic aspect of the recent development of Brazilian agriculture and its exports, but also reject the hypothesis raised by several news outlets that Brazil is somehow the “supermarket of the world”. The products in which Brazilian agriculture is most specialized do not have great synergy with each other after the farm gate, that is, they do not complement each other in complementary production processes, and are mostly commodities that will be exported to other countries, where they will be processed, gain value, branding and possibly re-exported. Even in products such as fruits and nuts, which do not require many processing steps, but command high premiums abroad, Brazil does not even represent 1% of world exports – for more in-depth information on this area, we recommend reading the text “The future of global agribusiness trade and Brazil’s insertion”.

It is also worth highlighting Brazil's difficulty in establishing trade agreements and reducing the barriers that Brazilian products face internationally. Unlike exports of more basic commodities, which generally have easy marketing, products with higher added value face protectionist markets, which are larger tariff barriers e non-tariff, such as specific production standards. As a result of the difficulty in accessing the market, there is greater cost, unpredictability and legal uncertainty in the business environment – ​​which considerably limits the demand for agro-industrial products, making it uninteresting (or viable) for national producers to operate in these markets.

In short, the analysis indicates that Brazil ranks fourth in the world in exports of agro-industrial products (considering the European Union as a whole). The country stands out more in exports of primary products, which are used as raw materials in the industrialization processes that occur mainly in developed nations. Consequently, Brazilian products are present on supermarket shelves around the world as inputs for final goods and, more rarely, as products for direct consumption. This has been a development option for producers in the various segments of Brazilian agriculture in recent decades, where we have achieved significant gains in productivity and international competitiveness. However, it is also clear that Brazil's share of the value-added products market still has potential for growth, an option that would require more strategic behavior from the country, greater dialogue, investment and coordination between the government, associations and companies in the sector, so that there is the development of actions that favor the internationalization of national products with higher added value. This would also incur higher costs in general and the search for access to markets, which should always be considered in strategic decisions.

1 Check in https://agro.insper.edu.br/storage/papers/January2024/ComercioAgro2023.pdf

2DAgribusiness GDP data calculated by Cepea Esalq/USP in partnership with CNA.

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