The current result is lower than that for the national industry (2.6%) in the same period. The performance of the sectors connected to agriculture (2.0%), extremely important to agriculture industry, made up for the retrogression of the segments related to livestock (-0.5%). The group formed by insecticides, herbicides and other agriculture chemicals fell by 1.2%, mainly due to its reduced use in soybean crops, once this product accounts for almost half of the use of chemicals in the country. It is also worth mentioning that the high currency exhange rate and the end of import duties over the import of chemicals stimulated the use of the imported product instead of the national one. On the other hand, the group wood processing expanded 3.3%. The performance of agro industry in the first semester of 2006 was negatively influenced by the following factors: fall of the international price of soybeans, high currency exchange rate, increase of production costs and sanitation problems in livestock, which resulted in the fall of the agriculture revenue and in debts for producers.

In an analysis by quarter, agriculture industry showed reduction of the rhythm of growth between the first (1.6%) and the second quarter (0.8%), especially due to the lack of dynamism of livestock, whose index changed from 4.5% in the first quarter to -5.4% in the second. Cattle and swine livestock have undergone the consequences of the embargo to exports of Brazilian meat to several countries, caused by the cases of foot-an-mouth disease registered in the end of last year in the states of Mato Grosso and Paraná. The poultry sector was negatively influenced by the dissemination of avian influenza, which led to significant fall in the world consumption of poultry meat.

Due to the low comparison base resulting from the interruption of harvests in the South region in part of São Paulo and Mato Grosso do Sul, after the dry period observed in 2005, there is a prospect of expansion for 2006. The June edition of the Systematic Survey of Agricultural Production  (LSPA) estimated a production of about 118,5 million tons of grains in 2006, 5.3% more than in 2005 (112,6 million tons).

According to data from the Secretary of Foreign Trade (Secex/MIDC), in the first quarter of 2006, in relation to the same period in the previous year, the volumes of the main agriculture industry products exported presented the following results: frozen bovine meat (10.9%), fresh or cooled bovine meat (-41.1%), poultry pieces and organs (-4.8%), rooster meat and pieces of hen (-18.2%), frozen swine meat (-21.0%), sugarcane (-12.3%), alcohol (-22.8%), cellulose (13.1%), frozen orange juice (-10.6%) and bovine leather and hides (43.1%). There was increase of the export of ground soybeans (17.7%) and fall of bagasse and other residues of the extraction of soy oil (-31.6%) and crude soy oil (-31.4%). It is worth mentioning that, besides the low international prices of soy derivatives, which lead to a higher revenue with exports, there was significant reduction of the export of soy oil, the product of highest aggregated value.

Manufacturing of industrial prducts from agriculture expands 3.3%

The sector of industrial products from agriculture expanded 3.3%, in the first semester of the year, with increased productionof five subsectors. The highlights are sugarcane derivatives (7.5%), reflecting, mainly, the increase of the demand for alcohol, intended to serve the growing fleet of biofuel cars. Other positive contributions came from cellulose (6.4%), stimulated by exports, tobacco (5.4%), rice (5.6%) and wheat (2.8%). These two products, traditionally belonging to the internal market, are being favored by the raise of salaries and by the subsequent consumption of basic food products.

On the other hand, the biggest retrocession came from soy derivatives (-10.7%), which suffered a negative impact because of international prices, of the currency high exchange rates and of the Asian rust, a type of fungus which affects the crops and causes damage to production. With reference to oranges, the reduction was 0.9%, as a consequence of the lower volume of frozen orange juice exported and of a series of diseases such as “citrus canker and citrus sudden death”, which affected mainly the production in São Paulo (80% of the national total). Finally, corn derivatives fell by 4.7%, influenced by the lower production of swine and poultry meat, and thse animals are great consumers of corn derivatives.

Industrial products used in agriculture fall by 7.0%

The sector of industrial products used in agriculture had decrease of 7.0% in the first semester of the year, as a consequence of the fall of the group of fertilizers (-1.1%) and machinery and equipment (-18.7%). The result is due to a group of negative factors affecting agribusiness (high currency exchange rate, reduction of prices of products such as soybeans, debts of producers, non-compliance with payments of fees and increase of costs), which cause lower investment in the purchasing power of agricultural producers and lower demand of investment in machines and equipment and a bigger demand for fertilizers.

Besides, the price of fertilizers and machinery and equipment rose due to the increase of costs of basic material, such as petroleum in the first case, and, in the second case, of steel. The exports of agriculture machinery and equipment also had a weak performance. According to statistics from the National Association of Producers of Automotive Vehicles (Anfavea), the quantity of tractors exported was 39.1% lower, and the number of harvesting machines decreased by 10.7% in comparison with the first semester of 2006 and with last year.  

Industrial products from livestock fall by 0.9%

 The sector of industrial products from livestock decreased by 0.9% in the first semester. Poultry derivatives fell by 3.6%, due, mainly, to the spread of avian influenza throughout Asia, Africa and Europe. This caused strong reduction of the main consuming and importing markets in Brazil (the main exporter in the world). Cattle and swine derivatives (-2.8%) underwent the consequences of foot-and-mouth disease in the states of Mato Grosso do Sul and Paraná in 2005, which caused and embargo of several countries against products from Brazil. On the other hand, the milk sub sector (4.7%), mainly aimed at the internal market, benefited from the growth of revenue, and the group leather and hides grew by 6.0%, especially because of the external market.

On the other hand, the manufacturing of industrialized products used in livestock increased by 0.9%. The group of veterinary products expanded 16.1%. The subgroup of animal food, more relevant, fell by 1.8% due to the crisis in cattle and swine livestock and in the poultry sector.