Brazil: Positive outlook for 2018

A positive outlook for the new year has been published by HF Brasil yesterday. “In the last two years, consumption of fruits and vegetables has been hampered by the economic crisis. Even with a slight resumption of growth in 2017, there has still been no significant recovery in overall fruit consumption.”

In the article it is explained that the purchasing power of Brazilian consumers decreased, which affected mostly the higher value products. Examples are seedless grapes, branded melons, specialty tomatoes, minis and baby vegetables and fruit and processed products. The effect on the basic products such as potatoes, tomatoes and onions it was less noticeable. Still, the basic vegetable sector recorded surpluses due to weak demand and increased supply. From the beginning of the Brazilian economic crisis in 2015, last year was the worst year.

According to HF Brasil the outlook for 2018 is an increase the consumption of fruits and vegetables, as a result of the improved economic situation. However, unemployment is rising and only a small growth in income is expected which may limit the increase of purchasing power. HF Brasil published a magazine that includes the expectations for 2018. See below a small summary:

2018 forecast for vegetables
It’s written that in general, during the summer of 2018 higher prices should be the case compared to the same period of previous years. This is due to the forecasted decrease in the production area. The low profitability of 2017 limited the investment of producers in their crops, such as for potato, tomato, onion and carrot in the first quarter of this year. “Only for lettuce, no reduction in production is forecast yet. It is not expected that winter vegetable producers will increase investments, even with the prospect of a better profitability in summer 2017/18. Producers should use some of their summer profits to pay off debts gained in previous periods.”

2018 forecast for fruits
For the fruit scenario, HF Brasil publishes that the investment levels remain at the same level as of 2017. “An exception is the decrease of papaya production due to the water crisis and limited results of 2017. Another exception is the increase of mango production.” It is mentioned that the water crisis has limited the production of some fruits.

Climate affecting production
Hf Brasil writes that the La Niña phenomenon is very welcome in Brazil during this summer of 2017/2018. “It allows rain to be above average in the Northeast of the country and less rain in the Southern part of the country. This is a beneficial forecast, because producers in the South have sufficient water reserves to maintain the summer production of the fruits and vegetables. However, the Northeast reeds rain to alleviate the lower water availability. ”

Variables that will favour fresh produce consumption in 2018

Brazil experienced a growth in GDP in the year 2017, but expects an even more positive growth for this year. This scenario may signal a resumption of consumption of fruits and vegetables in the domestic market. In addition, positive exchange and inflation might benefit the consumption. “Inflation forecasts low and falling interest rates, which in turn, signal greater availability of credit for the producer and the consumer.”

Variables that will limit fresh produce consumption in 2018

The unemployment hinders the recovery of consumption explains HF Brasil. For 2017, the unemployment rate is estimated at 13.1%. Even though some improvement is expected for 2018, it’s still forecasted to be 11.79%. “As the level of employment is one of the last to recover after periods of crisis, the indicators show that a more robust recovery consumption should only occur in the medium term, from 2019, since the income of families depends directly on the availability of jobs.”

Automatically income is the second variable that will hinder the consumption. “The resumption of the purchasing power depends on the fall in the unemployment rate, the greater availability of credit and reduced interest rates. The forecast is for a slight increase in income in 2018, according to the IMF.”

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