The Brazilian agroindustry grew by 1.6% in 2006, differently from 2005, when it fell by -1.0%. This rate was, however, below the growth of national industry in the year (2.8%). This result was positively affected by the occurrence of better climatic conditions in 2006, in relation to 2005 (a dry year, especially in the South), which favored the expansion of 3.4% in the sectors connected to agriculture. This increase was stimulated by the growth of sugarcane derivatives, cellulose and tobacco. This result was positively affected by the retrogression in the segments connected to livestock (-0.8%), due to the exports of chicken threatened by the avian influenza. Other factors which contributed negatively to the performance of agricultural industry were the higher value of the Brazilian currency (resulting in reduced exports of agricultural machinery and equipment), the rise of production costs and of the international price of soybeans. On a quarterly basis, the agricultural industry presented positive results in four quarters of the year. In the first quarter,  it grew 1.6%; in the second, it decreased 0.8%, reaching its highest rate in the third, and decelerating again in the last quarter of 2006 (0.8%).

Industrial Products from Agriculture grew by 4.3%

As a result of the increase of 3.6% of the Brazilian harvest  in 2006 versus 2005 (which was 116,6 million tons of grains, according to the Systematic Survey of Agricultural Production), due to better climatic conditions, the sector of industrial products from agriculture grew by 4.3% in 2006, with positive results in ix of the eight subsectors surveyed.

The sugarcane derivatives grew by 7.9% because of the demand for alcohol to match the increase of the automobile fleet, and also because of the increase of exports of sugar and alcohol (stimulated by the fall of international prices). Other positive contributions were: cellulose (4.2%), tobacco (6.2%) and oranges (1.9%); significant products for exports; rice (1.9%) and wheat (0.2%). The demand for these last two products, directed at internal supply, was benefited by the increment in the salary mass and by the consumption of basic food products.

On the other hand, the derivatives of soybeans, which is the main grain produced and exported by the country, were negatively affected by the high value of the Brazilian currency, by the low international prices, and by the Asian rust (a type of fungus that continues reducing productivity and causing damage to producers). Finally, the item corn derivatives (-3.7%), a basic input in the preparation of animal food for poultry, was negatively affected by the lower demand of poultry raising.  

Industrial Products Used by Agriculture

The sector of industrial products used by agriculture decreased by 2.6%, as a result of the fall of machinery and equipment (-16.7%), and f the increase of fertilizers (2.75%). The subsector of machinery and equipment was affected by a group of negative situations in the Brazilian agribusiness, such as: high currency value, the low international price of soybeans increase of costs, especially due to the rise of the prices of steel, the debts of producers. These factors led to a decrease of the agricultural income, and of the purchasing power of producers, causing the reduction of the investment in agricultural capital goods.

As a consequence of the higher value of currency, the decrease of exports of agricultural machinery and equipment also contributed to the reduction of production. According to data from the National Association Manufacturers of Automotive Vehicles (ANFAVEA), the quantity of tractor wheels exported was 31.0% lower, and the quantity of harvesting machines was 37.8% lower, in comparison with 2006 and 2005.

Industrial Products from Livestock

The sector of industrial products from livestock fell 0.7%. This result is due to the lower production of poultry derivatives (-3.4%), due to fall of the Brazilian exports of chicken meat, caused by avian influenza, which reduced the national consumption of this type of meat. Bovine and swine livestock had slight growth, despite the partial or total embargo of several countries to our exports because of the spots of foot-and-mouth disease which occurred in the end of 2005, in the states of Mato Grosso do Sul and Paraná. Throughout the year, several countries eliminated or reduced the effects of the embargo to Brazilian exports, including Russia, the major importer of Brazilian swine and bovine meat. The subsector of milk, predominantly directed to the internal market, had increase of 0.6%, and leather increased by 5.2%, because of exports.

Industrial Products Used by Livestock

The sector of industrial products used by livestock was reduced by 1.5%. The group of veterinary products increased by 2.0%, due, mainly, to the bigger production of vaccines for the prevention of  foot-and-mouth disease. On the other hand, the item animal food, more significant, fell by 2.2%, due to the crisis in the poultry sector, which led to the decrease of food consumption.

Exported volume of the main agricultural products

In 2006, according to estimates of the Department of Foreign Trade, the exported volume of the main agricultural industry products, in comparison with 2005, underwent the following changes: frozen bovine meat (21.3%), pieces and organs of poultry (-4.8%), non-cut pieces of hen and rooster meat (-9.1%), frozen swine meat (-10.3%), sugarcane (10;6%), alcohol (23.1%), cellulose (13.2%) and bovine leather and hide (59.7%). There was increase of the exports of ground soybeans (11.2%), but reduction of residues of soybeans (-14.5%) and crude soybeans oil (-23.8%), a product with higher aggregated value.