Food should remain expensive in early 2022 and only slow down in the second semester – 11/12/2021

Food prices will continue to rise in the first half of 2022. The easing should only happen in the second half of the year — and if all goes well, business and sector economists hope.

Increases in the first half will be general: from baked goods to packaged and processed products sold in supermarkets. This will happen due to an increase in the production chain, with modifications for grain, meat, electricity and fuel.

Prices should only start to slow at the end of the second quarter of 2022 if expectations of an increase in agricultural yields, a stabilization of the dollar, and a reduction in electricity tariffs with the return of rains are confirmed, according to businessmen and economists who heard. by UOL.

Drought and reduced agricultural production hampered

For them, the current rise in food prices is still a reflection of the problems that have arisen in the pandemic, such as the shortage of raw materials and disorganization in the global supply chain, which, in Brazil, have been added to the A decline in agricultural productionAnd dry e dollar appreciation.

These factors tend to lose their momentum in 2022. Therefore, these experts rule out that the current food price inflation, which dates back to 2020, is a problem that is here to stay forever.

The outlook for next year is continued cost pressures for food production due to energy and agricultural prices and the exchange rate. But we believe in improving the harvest of some commodities, which may help to absorb prices.
Joao Dornillas, President of the Brazilian Food Industry Association (ABIA)

Commodities are raw materials or fresh foods that the food industry uses in products sold after processing or processing. For example, sugar used in sweets or soft drinks.

Costs make food production more expensive

According to the president of Abia, which he represents One hundred companies that produce food and beveragesThe sector is still experiencing significantly higher costs today than it was before the pandemic.

after periods full closureAll orders and purchases that were placed on hold are returned at the same time. Disagreement between several countries over the same products has led to a race that has driven up prices.

Part of those bottlenecks are still there, and that should affect food prices in 2022, the food industry says.

Here are some of these costs.

• goods: According to the price index of the Food and Agriculture Organization of the United Nations (the Food and Agriculture Organization of the United Nations, a United Nations agency), the cumulative variance in 12 months for agricultural commodities was 31.3% until October of this year. Among the items that rose the most were coffee (+84%), sugar (+64%), corn (+64%), palm oil (+53%), wheat (+40%), soybean oil (+33%) . ), soybean (+24%).
• petroleum: The average price of oil on the international market (Brent type) in October (up to 27) was 125.7% higher than in October 2020.
• Electricity: The scarcity of rain has reduced the reservoirs of hydroelectric power plants in Brazil and forced the country to activate thermal power plants that produce energy at a higher cost.
• Packaging: As the prices of raw materials, such as plastics, aluminum, paper and cardboard, are adjusted, packaging prices in general also continue to put pressure on costs in the food industry. Some of these items have more than doubled in price in 12 months.

Take food export

André Braz, the economist who coordinates consumer price indices at Ibre (Brazilian Institute of Economics, affiliated with the Getulio Vargas Foundation), says that in addition to these factors, Brazil has experienced a decline in agricultural crop production, lack of rain and real depreciation, which is the factor that stimulates exports, draining The local market is fueling high prices.

Food inflation resulted from a perfect storm, with a pandemic, followed by crop failures and a water crisis that turned out to be more serious than we expected.
Andre Braz, IPC Ibre FGV Coordinator

Early 2022 is still under pressure

According to businessmen in the sector, most of these costs will remain high at least until the end of the first half of next year.

The prolonged drought that has negative effects on agricultural production and the instability of the dollar continues to put pressure on prices in the local market.

Additionally, companies in the sector report that this year’s cumulative inflation is also underpinning cost increases in the first half of 2022.

Inflation and the rise of the dollar will create pressure on the cost of production. The dollar directly affects the cost of raw materials and packaging. And the logistics cost, for example, will have to keep increasing because of the fuel.
Lindolfo Marinho, Managing Director of Cerpa brewery

Industry will pass prices

In addition to these costs, the industry in the sector should try to recreate a portion of the profit margin it lost early next year in 2021. In other words, pass price adjustments to end consumers.

We’ve already felt the impact of rising raw material costs in our operations since 2020, and after what our competitors have already done, we should adjust our pricing next year.
Lindolfo Marinho, from Serpa

Rest in the second semester

The forecast for the behavior of food prices in the second half of 2022 is already more positive, if its scenarios Agricultural crop growth And reduce electricity costs as Rain replenishes reservoirs Hydroelectric power plants, allowing less use of thermal plants.

Brazil has chances of having a positive harvest next year, normalizing the supply of products in the domestic market and contributing to lower prices.
Andre Braz, IPC Ibre FGV Coordinator

According to Brazz, food inflation in Brazil and in the world is not here to stay. He notes that this will become clear during 2022.

He claims that after hitting 18% in 2020, food inflation in Brazil should close this year at around 10% and drop, in 2022, to 5% or 6% at the end of the year.

Big increase in food

See the cumulative price variance in the 12 months to October 2021, according to the IBGE IPCA.

• HICP: + 10.67%
• Food and drinks: +11,71%
• food at home: +13,27%
• black beans: +17,47%
• corn: +18.45%
• flour: +15,36%
• refined sugar: +47,82%
• meat: +19.71%
• chicken: +33.28%
• Soy oil: +14.67%
• ground coffee: +34,53%
• fuel and energy: +31,52%
• cylinder gas: +37,86%