T
he behavior of the rice prices
throughout the supply chain in
thecommercial year that started
on 1st March 2017 and will end
on 28th February 2018 will be
characterized by heated fights for margins
among producers, industry and retail. At
consumer level, the bigger crop – even with
low stocks – and the availability of cheap
rice from Mercosur, especially from the
farms inParaguay, are reasons for themain-
tenance of the prices of this item of the ba-
sic food basket, without relevant variations.
In 2016, some capital cities registered
36-percent higher prices per kilogram, at
consumer level, but late in the year, the av-
erage global increase ranged from 6% to
7%. “It is the cheapest food item in the ba-
For the rice farmers, the situationdiffers
from the one projected to the consumers.
The harvest in South Brazil started in Feb-
ruary and March 2017, and the prices have
alreadydroppedalmost20%,fromR$50to
R$41,with theblamegoing to thedrought.
“It is natural for prices toweakenat harvest
in light of soaring supply, almost 60% of it
concentrated in March and May. Neverthe-
less, the phenomenon we have witnessed
at the beginning of 2017, the degree of im-
pact onprices, was surprising, as it subvert-
ed market foundations”, says Tiago Sar-
mento Barata, commercial director at the
RioGrandedoSul Rice Institute (Irga).
According to Barata, judging from the ex-
pectationofanormalcrop,of8.5milliontonsin
theState,takingintoconsiderationthesmaller
thanexpected crop in 2016 and the lowend-
ingstock,therewouldbenoreasonsforasig-
nificant drop even before commercialization
started. He understands that a search for ex-
portmarketsisthesolutionforabalanceinthe
first half of theyear, inspiteof theunfavorable
exchange rate. “Another determining factor
for theprices is thespeedand thevolumeof
thecroptradedbythefarmers”.
Barata believes that prices in Brazil will
graduallybesetthroughouttheyear,based
on a parity with the international market.
For the second half of the year – from Au-
gust 2017 to February 2018 there will be a
gradual recovery of the levels close to the
prices in 2016, when the ceiling price in Rio
GrandedoSul reachedR$51.
“Supplywill be rather scarceandselect-
ed. Only prosperous farmers will have rice
to trade. This establishes a more equani-
mous correlation of strengths in the mar-
ket”, he says. There is, on the on the other
hand, the exchange rate, always sensitive
to the unexpected turns of the global econ-
omy and the political scenario inBrazil, Eu-
rope and theUnitedStates, which could al-
ter the scenarios at anymoment.
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Concentration
Riceprices throughout 2017will bedictatedby the lawof themarket. This is theopinionofMárioPegorer, president of theBrazilianAs-
sociationof Rice Industries (Abiarroz). “Supply, demandand the relationbetweendomestic and foreignpriceswill determine the levels to
be practicedby the supply chain”, he says. He understands that the industry has been reducing themargins and is increasingly pressured
by the value of the rawmaterial (rice in the husk) and retail, which does not accept price increases and is asking for ever-increasing con-
cessions when it comes to opening their supermarket shelves. “There is need for creativity, administration and efficiency in the process-
es tobear thepressure coming frombothsides, andcontinue investing inquality, logistics and in the consolidationofmarkets”, he cites.
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At the industry
PRICEOFRICEWILLSUFFERADECREASEINTHE
FIRSTHALFOFTHE2017/18COMMERCIALyEAR
ANDTHETRENDISFORAGRADUALRECOVERy
OVERTHESECONDHALFOFTHEyEAR
sic food basket, taking into consideration its
relevance for the diet of the Brazilian popu-
lation”, recalls Antonio da Luz, head econo-
mist at the Rio Grande do Sul Federation of
Agriculture. It means that a price increase,
even at significant percentages, does not
representmuchmore than some cents.
Withintheperspectiveforasmallerinfla-
tion rate in 2017 and the importance of the
cereal for national food security, the expec-
tation holds true. The federal government
anticipates an increase of 17.7% in the gross
value of the rice crop (VPB) in 2017, fromR$
10.197 billion to R$ 11.998 billion. The value
represents the expected bigger crop.
Deep
impact
Consumers will hardly sense the price variations in the supermarkets
Inor Ag. Assmann
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