In 2005, agricultural industry shrank 0.9%, following an opposite trend in comparison with the average Brazilian industry (3.1%) in the same period. The performance of the sectors linked to livestock (3.7%) was not enough to make up for the decline of those linked to agriculture (-4.0%), which are the main contributors to agricultural industry. On a quarterly basis, agricultural industry shrank 3.5% in the first quarter, recovered in the second one (3.6%) and shrank again in the third (-1.5%) and fourth quarters (-2.8%).

The bad performance of agricultural industry in 2005 is related to an unfavorable conjuncture especially to the sectors related to harvests, which were affected by climatic factors, by the fall of international prices of some agricultural commodities, by the exchange value of currency and by the increase of production costs. The dry season in the South region and in part of São Paulo and Mato Grosso do Sul caused problems in the harvest, according to the Systematic Survey of Agricultural Production (LSPA), which estimated a production of 112.5 million tons of grains in 2005. This result was 5.7% inferior to the harvest of 2004 (119.3 million tons).The decrease of the agricultural profitability and the increase of production costs led to the reduction of the purchasing power of producers, causing significant decline of the group of industrial products used in agriculture (-20.5%), the main responsible for the decline of agricultural industry.

The group insecticides, herbicides and agrochemicals in general expanded by 16.2%, mainly due to the measures taken against the spread of Asian rust in soybean plantations, a type of crop which accounts for almost half of the use of agrochemicals in the country. The group of wood processing felll by 5.1%.

The sectors linked to livestock, despite the spots of foot-and-mouth disease in cattle herd in Mato Grosso do Sul and other possible cases in Paraná in the last quarter of the year, continued benefiting from the good performance of exports of bovine meat, swine meat and chicken. This sector was stimulated by the favorable international market and by the increase of the amount of meat exported, both consequences of sanitary crises. Two instances of such crises are the mad cow disease, which affected herds in Europe, Canada and in the United States and the avian influenza, which continued affecting countries in eastern Europe.

According to information from the Bureau of Foreign Trade (SECEX/MDIC), the percent distribution of the main agricultural products exported, in the comparison 2005/2004 was: frozen bovine meat (22.4%), refrigerated bovine meat (-3.1%), pieces and parts of poultry (18.2%), frozen swine meat (16.2%), sugar from sugarcane (21.0%), cellulose (11.3%), tobacco (7.1%), alcohol (12.4%), sawed wood (-6.6%) and bovine skin and leather (17.4%). Concerning the production of soybeans , there was reduction of the exports of bagasses and other residues of the extraction of soybean oil (-0.4%) and increase of soybean oil (4.3%) and ground soybean grains (16.6%). However, due to the fall of international prices of soybean derivatives, the revenue coming from the export of these products had significant reduction.

Industrial products from agriculture

In 2005, the subsector of industrial products from agriculture shrank 1.0%. Among the five subsectors with decrease in dynamism, the main contribution came from corn (-15.4%). This crop, besides having been affected by the low prices and by the reduction of planted area, suffered the consequences of lack of rain in the main producing areas, especially in Paraná, the main producer in the country.

It is worth mentioning the fall of sugarcane derivatives (-3.6%). It happened due to the stimulus to the alcohol production, in order to supply the domestic demand, compared to the growth of the fleet of "two-fuel" cars, regardless the production of sugar, which most contributes to this subsector. With positive rates the highlights are: cellulose (4.4%), helped by exports; wheat (3.0%) and rice (5.6%). These two products, traditionally directed to the domestic market, may be reflecting the rise of salaries, and, consequently, a bigger consumption of food products.

Industrial products used in agriculture 

The sector of industrial products used by agriculture fell by 20.5% in 2005, a result very different from those registered in 2004 (1.1%) and 2003 (11.9%). This performance reflected the fall of the groups of fertilizers (-10.9%) and machinery and equipment (-38.5%). They were affected by the reduction of the income of agricultural producers which resulted from the following factors: interruptions in harvesting, fall of prices of some important agricultural products in the international market (especially soybeans), increase of the production costs and higher value of currency. The rise of the cost of production of fertilizers is related, above all, to the rise of petroleum prices, which is a basic input to their production. Concerning machinery and equipment, the higher cost of production is due to the high prices of steel, due to the increased relevance of iron ore. Exports also contributed to the weak performance of machinery and equipment. According to data from the National Association of Producers of Automotive Vehicles (ANFAVEA), the amount of harvesting machines exported was 33.2% lower, whereas the international sales of tractors increased by only 1.8%.

Industrial products from livestock

In 2005, the sector of industrial products from livestock grew by 2.9%, reflecting the advance in all subsectors. The production of poultry derivatives, expanded 3.0%, stimulated by exports and due to the good international prices and to the limited offer in the foreign market. The main reasons to this situation is the avian influenza, which is still bringing damage to important Asian exporters. It is worth mentioning that Brazil is the major exporter of chicken in the world.

The group of derivatives of hogs and pigs and of cattle, although having faced the impact of the spots of the foot-and-mouth disease, registered a slight increase (0.8%), supported by exports. It is worth mentioning that, until September 2005, this group had grown by 2.3%, but declined in the fourth quarter (2.3%). Currently, Brazil leads the ranking of international sales of bovine meat and is one of the main exporters of hogs and pigs.

The subsector of milk, aimed mainly at the domestic market, increased by 6.3%, whereas that of leather and skin, by only 0.9%.

Industrial products used in livestock

The sector of industrial products used in livestock expanded 6.9% in 2005, due to the growth of the groups of animal food (6.4%) and of veterinary products (9.2%). The latter was influenced, mainly, by the increased production of vaccines to control and prevent foot-and-mouth disease.