Agribusiness GDP Growth Despite Quarterly Declines despite the quarterly declines, at the close of 2021, GDP grew for all segments of the agribusiness. As seen in previous reports, both the primary sector and input segments saw significant increases in 2021, with growth rates of 17.52% and 52.63%, respectively. The GDPs of the other two segments also advanced over the year: 1.63% for agroindustry and 2.56% for agroservices (Table 1).

From the perspective of the agribusiness sectors, the scenarios for the year ended on opposite notes. There was a significant increase in the GDP of agricultural chains, while the livestock chains experienced a decline.

Agricultural Sector and Livestock Sector Performance in 2021 In the agricultural sector, despite a 0.59% decrease in the fourth quarter, GDP grew an impressive 15.88% in 2021 compared to 2020. This excellent result for the year was primarily driven by the agriculture GDP, which increased by 23.5%. However, all segments positively influenced the overall growth in 2021, with increases in agricultural inputs (60.52%), agroindustry based on plant products (7.18%), and agroservices provided to the sector (12.81%) – see Tables 1 and 2.

In general, the scenarios presented in the previous report remained consistent. The strong growth in agriculture was mainly due to the high real prices of agricultural products, despite significant production losses for key crops due to unfavorable weather conditions. The increase in income in this sector was not greater due to the also substantial rise in production costs. This can be seen in the growth of GDP for agricultural inputs, which occurred largely due to the significant rise in fertilizer and agricultural machinery prices. The growth in the national production of fertilizers, pesticides, and agricultural machinery also boosted the results of this segment.

For agroindustry based on agricultural products, as in the primary sector of the industry, the GDP growth was primarily due to the real increase in prices, given the decline in overall production for the segment. Throughout 2021, agroindustrial production had been recovering compared to the previous year until the end of the first semester; however, this acceleration did not persist, and results worsened in the second half of the year. By the end of the year, there was a drop in production for the following industrial activities: biofuels, sugar, milling and starch product manufacturing, canned fruits/vegetables/other plants, wooden furniture, and other food products. Additionally, coffee, tobacco, and vegetable oil processing remained practically stagnant.

Also, in the agricultural sector, the growth of GDP in agroservices stood out. Taking the transportation sector as an example again, according to the quarterly report from Fretebras, agribusiness freight rates increased significantly in 2021, driven by the transportation of fertilizers, soybeans, and corn.

The GDP of the livestock sector, on the other hand, declined by 8.95% in 2021 compared to 2020, after another drop in the fourth quarter of the year (Tables 1 and 2). The main pressure on the livestock GDP came from the negative agroindustrial result (-16.82%) – which, in turn, was mainly driven by the narrowing of margins in this segment, with difficulty in passing on the increases in raw material costs and other industrial costs to Brazilian consumers, whose purchasing power was weakened throughout the year. Furthermore, the reduction in cattle slaughter, due to the shortage of cattle ready for slaughter, also affected the result of the industry.

Still, in the livestock sector, it’s worth noting that the variation in the GDP of the primary segment, although positive (5.79%), was considered modest given the high levels of prices for livestock products. This is mainly a reflection of the strong rise in costs – due to the escalation in grain prices and the increase in other production costs – as well as the lower production of beef. Again, this can be seen in the significant growth of the livestock input segment, which occurred primarily due to the increase in the prices of animal feed.

INPUTS SEGMENT: Strong Growth in 2021

In 2021, the GDP of the agribusiness input segment grew by 52.63% compared to 2020 (Table 1). In the last quarter of the year, the growth was 13.24% (Table 2). These results reflected the performance of activities within both the agricultural and livestock sectors. As shown in Figure 1, with the exception of Animal Medicines – which remained practically stable – all other activities monitored in the segment recorded annual revenue growth, with highlights being the fertilizer and soil correction industries, agricultural machinery, and animal feed industries.

PRIMARY SEGMENT: High Costs Limited Results in the Field in 2021, but They Were Still Satisfactory

In the fourth quarter of 2021, the GDP of the primary segment fell in both agriculture (-4.22%) and livestock (-2.91%) (see Table 2). Despite this slowdown, the segment closed 2021 with an impressive growth of 17.52% compared to 2020. This excellent result was driven by agriculture, where GDP grew by 23.5% for the year. In livestock, GDP grew by a more modest 5.79% between 2020 and 2021 (see Tables 1).

For agriculture, the increase in GDP was primarily due to higher real prices, especially for grains, sugarcane, and coffee. However, GDP was negatively impacted by production losses in various crops due to unfavorable weather conditions and the rise in production costs – with price increases for key inputs.

For livestock, as pointed out in previous reports, the positive effect of high prices for live animals, milk, and eggs on GDP was insufficient to offset the sharp rise in costs, leading to a more modest GDP growth. Additionally, the reduction in beef production – the main activity in terms of GDP representation in the segment – also contributed to the weaker performance of the livestock GDP.

For the agricultural primary segment, considering the weighted average of the various crops, there was a 1.25% decline in production – primarily due to unfavorable weather conditions that caused yield losses in significant crops forming GDP. The crops that saw reduced production in 2021 were cotton, coffee, sugarcane, beans, cassava, corn, and tomatoes. On the other hand, considering a weighted average, agricultural prices increased by 28.78% in real terms in 2021 compared to 2020. There were significant price increases for cotton, coffee, sugarcane, corn, soybeans, wheat, and firewood/charcoal. Prices also rose in real terms, but with less intensity, for cocoa, oranges, cassava, tomatoes, and logs. Only six of the monitored products saw real price declines in 2021: rice, bananas, potatoes, beans, tobacco, and grapes. Thus, considering both production and real prices, the annual revenue growth for the agricultural primary segment was a remarkable 27.18%.

For the livestock primary segment, also considering the weighted average of the monitored activities, there was a 16.37% increase in prices between 2020 and 2021. Only the price of live pigs decreased, while prices increased for all other monitored activities (beef, chicken for slaughter, milk, and eggs). In terms of production, there was an average reduction of 1.44%, reflecting the lower production of both beef and milk. Consequently, the real annual revenue increased by 14.7%. It is important to note that this result did not translate into an increase in GDP due to the even more significant rise in input costs in these activities (an average increase of 29.5%).

Figures 2 and 3 and Table 3 detail the specific results of the segment by agricultural and livestock activities. Among the crops in the agricultural primary segment monitored by Cepea, revenue growth in 2021 was observed for cotton, rice, cocoa, coffee, sugarcane, oranges, cassava, corn, soybeans, tomatoes, wheat, firewood/charcoal, logs, and wood for pulp. On the other hand, crops for which revenue declined included bananas, potatoes, beans, tobacco, and grapes.

For wheat, the increase in prices between 2020 and 2021 (19.52%) and the 23.17% rise in production for the year explain the 47.21% growth in revenue. According to Conab, the record production reflects larger areas and improved productivity. Despite the production expansion, Conab notes that the crop’s productive potential was impacted by weather irregularities. Even though prices rose between 2020 and 2021, the Cepea Wheat team indicates that in Brazil, negotiations were slow throughout the year, particularly in the first half. In the first quarter, besides trade restrictions in several cities, producers focused on the harvest and storage of the summer crop. During the second quarter, the pace of negotiations was negatively influenced by weaker demand. In the third quarter, wheat prices remained elevated – in July, low temperatures caused losses in some fields, and in August, droughts and high temperatures raised concerns, which influenced price hikes. At the same time, import parity was high, and there was good domestic demand, mainly from the feed sector. In the final quarter of the year, prices remained firm. The Cepea Wheat team stated that producers began storing higher-quality wheat, intending to negotiate it in the first half of 2022, when prices typically rise above the annual average. In the last two months of the year, support came from high external prices, lower global supply, and the elevated import parity.

For soybeans, the annual revenue increase was 42.28%, driven by a 28.58% rise in real prices between 2020 and 2021, and a 10.66% increase in annual production. Conab points out that productivity gains and the expansion of area led to a record harvest – climatic adversities affected the quality of some harvested lots, but they were not enough to harm the results. The expansion of planting areas was primarily motivated by good prices for the product. Despite the increased soybean harvest, prices rose during the first half of 2021 and remained at high levels in the second half. The Cepea Soybean team notes that in the first quarter, prices rose due to the slow pace of the harvest in Brazil, the need to meet contract obligations (especially with international markets), logistical challenges, the global appreciation of the grain, and the depreciation of the Real against the Dollar. In the second quarter, the confirmation of a soybean crop loss in Argentina, low stocks in the U.S., and unfavorable weather conditions in Argentina boosted prices in Brazil. Starting in July, along with lower stocks, Brazilian industries began signaling the need to replenish their soybean inventories, increasing competition with international buyers. It is noteworthy that in the third quarter, logistical issues in the U.S. (hurricanes on the Gulf Coast) and Argentina (low river levels) also affected prices. In the final quarter of the year, the intensified planting season in Brazil (benefited by rain), the larger domestic surplus, the need to clear inventories for the new harvest, and weakened negotiations pressured prices.

Regarding corn, the revenue increase (24.80%) was exclusively due to the 47.06% rise in real prices compared to the previous year. Production, however, declined by 15.14%, marking the worst result since the 2017/18 harvest. According to Conab, the planted area for the three crops increased, but it was not enough to compensate for the strong adverse effects of the climate on productivity. The Cepea Corn team points out that corn prices reached record levels in the Brazilian market throughout 2021, driven by low stocks from the 2019/20 harvest and, particularly, concerns about the impacts of weather on the planting and development of the 2020/21 crop. Even with the harvest of the first crop advancing, prices saw significant increases in the first quarter, due to low stocks, limited productivity of the first crop, and delays in the sowing of the second. In the second and third quarters, prices remained strong due to the same fundamentals. However, in the third quarter, the supply situation worsened due to drought and frosts. In October and November, corn prices fell, influenced by reduced buyer activity, the advance of the second crop harvest, lower exports, and the sowing of the 2021/22 summer crop under favorable conditions. In December, however, limited availability and dry weather kept sellers out of the spot market, which supported domestic prices.

For cotton, the annual revenue increase (20.50%) was also due exclusively to higher real prices (53.24%), as production fell by 21.36%. According to Conab, the production decline was related to reductions in both area and productivity. The smaller area reflected the market downturn during the COVID-19 pandemic in 2020, and productivity was affected by weather fluctuations, particularly rainfall patterns. The Cepea Cotton team highlights that prices have been rising since mid-2020. In the first quarter of 2021, the recovery in consumption across the textile chain exceeded expectations, boosting demand from domestic buyers and tightening passage stocks. In the second quarter, prices fluctuated, negatively pressured by new restrictions related to the pandemic’s spread but supported by limited cotton stocks from the 2019/20 harvest and concerns about the 2020/21 crop due to climatic issues. From July onward, despite the larger volume of the 2020/21 harvest entering the market, prices rose monthly. Throughout the second half of the year, prices were driven by smaller production, strong domestic demand, international prices, and exchange rate trends.

For coffee, the revenue expansion (20.02%) was due to higher real prices (58.66%) in 2021, while production fell by 24.35%. According to Conab, the production decline was due to adverse weather conditions and the negative biennial cycle of the Arabica crop. Price trends showed growth throughout the year. The Cepea Coffee team notes that in the first quarter, the price increase reflected the devaluation of the Real against the Dollar, the limited supply from the previous harvest, and expectations of a crop failure in 2021. In the second quarter, prices surged due to confirmation of the national crop loss, expected losses in Central America, and logistical issues in Colombia. In the second half, the price increase, particularly for Arabica, was even more significant, driven by new concerns about global supply and logistics. In Brazil, Arabica coffee plantations were impacted by prolonged droughts and frosts, leading

For Oranges, the 11.69% increase in revenue was mainly due to a 9.78% rise in real prices, but production also grew by 1.74%. According to the Hortifrúti/Cepea team, the high price levels throughout the year were primarily a result of a more restricted supply of the harvest, both in quantity and quality.

For Tomatoes, the 9.58% revenue increase was driven by a 11.56% rise in real prices when comparing 2020 to 2021. However, production showed a slight decrease of 1.78%. The Hortifrúti/Cepea team explains that in the first half of the year, prices were lower due to higher availability, quality issues, and a reduction in demand, which was also influenced by new restrictions on various sectors. In the third quarter and in October, prices increased. According to the team, this price hike was partly seasonal but also reflected intense cold and frost during certain periods. However, it was somewhat constrained by the presence of damaged tomatoes in the market, including those with blemishes and cracks caused by moisture. From November onwards, prices decreased as the harvest advanced.

For Rice, the near stability in revenue (0.02%) was due to a 5.11% increase in production and a 4.84% decrease in prices year-on-year. According to Conab, the production increase was driven by higher productivity and, to a lesser extent, expanded area. Regarding prices, the Arroz/Cepea team notes that the decline in 2021 was primarily due to price adjustments after the significant peaks seen in the second half of 2020. In the first quarter of the year, price fluctuations were not significant, but starting in May, prices dropped more sharply due to weakened demand and difficulties in the wholesale and retail rice markets. This trend continued until December.

For Potatoes, the decrease in real prices (-15.23%) explains the 4.94% drop in revenue, while production increased by 12.14%. The Hortifrúti/Cepea team explains that in the first half of 2021, the price drop was primarily caused by limited demand due to COVID-19 restrictions and the reduction in emergency aid. During the third quarter and October, potato prices rose due to various factors, including a significant production loss caused by frost. However, from November onwards, the increase in harvests in Southwest São Paulo and the start of the “water crop” season pressured prices once again.

Figure 3 illustrates the dynamics observed in the “on the farm” segment of the livestock sector. In 2021, all activities tracked saw an increase in revenue, which was primarily driven by the rise in real prices.

-with the exception of pig farming for slaughter, as will be discussed below.

The 14.43% annual revenue growth in beef cattle for slaughter was due to a 21.58% increase in real prices compared to the average level of 2020. However, annual production fell by 5.88% compared to the previous year. This behavior reflects the continuation of conditions seen in 2020, namely, an overheated external demand, notably from China, and a restricted supply of animals at the ideal weight for slaughter in Brazil. According to IBGE, the number of cattle slaughtered in Brazil between January and September 2021 was the lowest since 2004. As a result, prices remained at high levels for much of the year, with monthly averages for the fattened steer exceeding R$ 300.00 – in May, the peak of the year was recorded at R$ 333.11. Starting in September, there was a slight reversal in the upward trend, and by October, the average price of the steer dropped to R$ 268.00. This decrease was due to a drop in external demand caused by the suspension of exports to China, which lasted until mid-December after two atypical cases of Bovine Spongiform Encephalopathy – commonly known as “mad cow disease.” During the export suspension period, the decline in prices was not more intense due to the limited supply of cattle in the fields. In the last weeks of December, after exports to China resumed, the price of the steer rebounded rapidly, reaching a record level for a daily nominal average of R$ 336.50.

In dairy cattle farming, the annual revenue grew by 9.60%, driven by a 12.36% increase in real prices compared to 2020, despite a 2.45% reduction in annual production. According to the Leite/Cepea team, climatic adversities and high costs, especially due to the depreciation of the currency, were the main causes for the limited milk supply throughout the year. Although the average price for the year was higher than in 2020, there was a decline in the amount paid to producers in the last quarter, mainly due to reduced demand from dairy companies, which faced a loss of purchasing power from consumers and a subsequent drop in the price of raw materials purchased from the field.

In poultry farming for meat production, revenue rose sharply by 37.88%, due to a 30.34% increase in real prices and a 5.79% increase in production in 2021 compared to 2020. According to the Frango/Cepea team, the weakening of purchasing power among a significant portion of the population led to an increase in chicken consumption, as it replaced more expensive animal proteins, such as beef and pork. The increase in domestic demand led to a price adjustment for producers, but these adjustments were not enough to cover the rise in feed costs, which can represent up to 70% of the production costs for poultry farmers. In the external market, exports also performed well, both in terms of the volume of shipments, the average price paid for the product, and the depreciation of the Brazilian real against the dollar.

In egg production, annual revenue grew by 12.79%, driven by a 13.14% increase in real prices compared to 2020, although production remained almost stable, with a slight decrease of 0.30%. The demand for eggs was buoyed by the increase in the prices of animal proteins, while the producers’ strategy of controlling supply to prevent sharp price drops also contributed to the price rise. However, the Leite/Cepea team pointed out the deterioration of egg producers’ purchasing power, as they faced high prices for key inputs such as corn and soymeal. This led to the most unfavorable relative price levels since the start of Cepea’s historical series in 2013.

Finally, in pig farming for meat production, annual revenue increased by 6.33%, driven by a 9.23% increase in production, while real average prices fell by 2.65% compared to 2020. The Suíno/Cepea team reported that external demand for pork remained strong, especially with China as the main destination for exports, which set records for both the volume of shipments and revenue, despite logistical difficulties such as container shortages. In the domestic market, there was significant volatility, and consumption did not meet producers’ expectations, largely due to the loss of purchasing power among a portion of the population. This decline in domestic demand, along with an increase in the number of slaughtered animals, pressured the prices of live pigs and meat, which somewhat mitigated the revenue increase. Additionally, producers faced higher costs for feed, electricity, and fuel, which squeezed their profit margins.

INDUSTRIAL SEGMENT: Agroindustry declined again in the 4th quarter, but saw modest growth for the year

In the fourth quarter of 2021, Brazil’s agroindustry GDP contracted once again. This decline was primarily driven by the livestock sector, given the worsened performance of animal processing during that period – from September onwards in 2021, prices for pork, poultry, and dairy products showed a downward trend. On the other hand, the GDP of the agricultural industry remained almost stable in the last quarter of the year (Table 2).

Despite the contractions in the second half of the year, agroindustry saw modest growth of 1.63% for the full year compared to 2020. There was growth in the agricultural industry (7.18%) and a decline in the livestock industry (-16.82%) – see Table 1.

In the agricultural sector, GDP growth was mainly driven by the real increase in average prices (15.54%), despite a decline in the sector’s overall production in 2021 (-1.63%). As a result, annual revenue grew by 13.66%. Throughout 2021, agroindustrial production recovered compared to the previous year until the end of the first semester, but this acceleration did not persist, and results worsened during the second half of the year. Between 2020 and 2021, there was a decrease in production for the following activities: biofuels, sugar, milling and starch product manufacturing, canned fruits/vegetables/other vegetables, wooden furniture, and other food products. Additionally, the processing levels for coffee, tobacco, and vegetable oils remained practically stagnant.

In the livestock sector, as discussed in previous reports, 2021 was marked by difficulties in passing on raw material price increases to Brazilian consumers. This, combined with a decrease in cattle slaughter due to the low availability of cattle ready for slaughter, put negative pressure on GDP. Between 2020 and 2021, industrial prices in the sector increased by an average of 12.33%, while production volume fell by 3.06%, resulting in an 8.89% increase in revenue. At the same time, it is estimated that the intermediate cost of the sector rose by 18.2%.

According to Cepea’s tracking of GDP evolution, the agricultural-based industries that saw revenue growth in 2021 included: wooden furniture and products, pulp and paper, biofuels, textiles and clothing, the coffee industry, vegetable oils, and other food products. On the other hand, the beverage industry, as well as the sugar, canned fruits/vegetables/other vegetables, milling and starch product manufacturing, and tobacco product industries, all saw estimated revenue declines (Figure 4).

For the vegetable oil industry, the revenue increase (25.3%) was a result of higher real prices (26.2%) compared to 2020. In turn, annual production remained almost stable, with a slight decrease of -0.7%. According to the Soja/Cepea team, the overall market conditions throughout the year were characterized by strong internal and external demand, explaining the upward trend in prices.

Regarding biofuel production, the 27.1% annual revenue growth was driven by a 47.2% increase in real prices compared to the previous year, offsetting a 13.7% reduction in annual production. According to Conab, the decline in production of the byproduct was due to lower sugarcane production, which was affected by adverse weather conditions. Notably, the decline was less severe due to a significant increase in corn ethanol production during the same period. For prices, according to the Etanol/Cepea team, they reached levels well above those seen in previous seasons during the 2021/22 season, largely due to lower product availability and, at times, increases in gasoline prices.

SUGAR PRODUCTION:

In the case of sugar production, there was a 5.2% reduction in annual revenue, due to a 17.8% drop in production, despite a 15.3% increase in prices when comparing 2020 to 2021. Similar to biofuels, the reduction in sugar production was related to lower sugarcane production. Regarding prices, the Açúcar/Cepea team reports that prices had been on the rise since August 2020, primarily driven by strong export activity, which was further supported by the depreciation of the Brazilian Real against the US Dollar. In the last three quarters of 2021, price increases were further reinforced by restricted supply and higher international commodity prices.

TEXTILE AND CLOTHING INDUSTRIES:

The textile and clothing industries saw revenue increases of 24.2% and 12.8%, respectively, mainly reflecting the recovery in production, though this growth slowed significantly from the third quarter onward.

LIVESTOCK-BASED AGROINDUSTRIES:

As shown in Table 4, there was a revenue increase in the meat processing and leather and footwear industries – the latter after three consecutive years of decline. However, the dairy industry experienced a drop in revenue.

For the meat processing industry, there was a 13.6% increase in annual revenue, driven by a 16.01% rise in real prices compared to the previous year. Annual production, on the other hand, decreased by 2%. As mentioned earlier, this decline was due to the reduced slaughter of cattle, which remained constrained by the limited availability of cattle ready for slaughter in the field.

Overall, the results in the meat processing industry mirrored the dynamics observed in livestock production, but they also reflected the weakened purchasing power of a significant portion of the population due to the pandemic-induced crisis. In beef production, since 2020, supply has not met demand satisfactorily. As a result, carcass prices for cattle remained at high levels throughout the year, driven by the robust export market. On the other hand, due to high prices and the diminished purchasing power of the Brazilian population, the industry faced difficulty passing on cost increases to consumers. A similar scenario explains the low domestic demand for pork, which resulted in low liquidity for most of the year, making it difficult for slaughterhouses to pass on price increases. In such situations, consumers often turn to substitute products, such as chicken and eggs. Indeed, the internal demand for poultry remained strong for most of the year, which kept prices above those observed in 2020.

The dairy industry ended 2021 with an 8.65% drop in revenue, reflecting an 8.3% decrease in annual production, with real prices remaining almost stable at -0.38% compared to the previous year. According to the Leite/Cepea team, the year was marked by intense competition for raw materials and squeezed margins for dairy industries. The limited supply of milk in the field, due to adverse weather conditions and rising production costs, led to increased competition among dairy industries, keeping raw milk prices at high levels. However, low consumer demand for dairy products—again due to reduced purchasing power—limited the industry’s ability to pass on the increase in raw milk prices to processed products sold through distribution channels. The outcome of this scenario, characterized by weak demand and pressure from distribution channels, was the accumulation of inventories and a decline in both dairy and raw milk prices, which became more noticeable in the last quarter of the year.

SERVICES SEGMENT: Agri-services end 2021 on a positive note

In the fourth quarter of 2021, the GDP of agri-services in Brazil’s agribusiness sector fell by 2.66%, in line with the performance of upstream segments during that period (Table 2). However, between 2020 and 2021, the segment saw a growth of 2.56%, with a 12.81% increase in the GDP of agricultural services, but a 19.45% decline in the GDP of livestock services (Table 1). The positive performance of agri-services was primarily due to the strong performance of agriculture, particularly the larger production of soybeans and higher prices for grains, sugarcane, and coffee. As noted in the introduction of this report, taking the transportation sector as an example, the Fretebras quarterly report shows that freight costs in agribusiness surged significantly in 2021, driven by the transportation of fertilizers, soybeans, and corn.

It’s important to highlight that the slowdown in segment growth, observed throughout the second half of the year, reflected the deceleration in the recovery of crop processing, as mentioned earlier. However, the good performance of agriculture in 2021 led to an increased use of services such as commerce, transportation, storage, as well as financial, communication, legal, and accounting services.

In terms of livestock services, the decline in GDP for the segment also reflected the upstream performance, especially the lower cattle production and slaughter, as well as the narrowing of margins along livestock chains due to rising production costs.

CONCLUSIONS

After a modest performance in the third quarter of 2021, Brazil’s agribusiness GDP declined in the fourth quarter, mainly reflecting a deterioration in real prices in the sector. However, despite the setbacks in the second half of the year, the agribusiness GDP grew for all sectors, accumulating a significant increase of 8.36%. Both the primary sector and input segments stood out in 2021, with growth rates of 17.52% and 52.63%, respectively; and the GDP also grew for the other two sectors, with an increase of 1.63% for agroindustry and 2.56% for agri-services.

As seen in previous reports, the opposition between agricultural and livestock sectors remained. Between 2020 and 2021, the agricultural sector’s GDP grew by 15.88%, while the livestock sector’s GDP fell by 8.95%.

In the agricultural sector, the highlights were agriculture and agricultural input segments. The strong growth of the agricultural GDP was mainly driven by high real prices, given the significant production losses for key crops in response to adverse weather conditions. It’s worth noting that income growth in this segment was not higher due to the significant increase in production costs, which can be observed in the growth of the agricultural input GDP. This growth largely reflected the substantial rise in fertilizer and agricultural machinery prices (but the growth in domestic production of fertilizers, pesticides, and agricultural machinery also contributed to the results).

Within the agricultural sector, the slowdown of agroindustry in the second half of 2021 was noteworthy, following several recoveries observed during the first half. By the end of the year, production had fallen in activities like biofuels, sugar, milling and starch product manufacturing, canned fruits/vegetables/other vegetables, wooden furniture, and other food products; furthermore, the processing levels for coffee, tobacco, and vegetable oils remained practically stagnant. Nevertheless, primarily due to the real price increases, the agricultural industry ended 2021 with an increase in GDP. With good results in upstream segments, the agri-services provided to the sector also advanced last year.

On the other hand, as shown in previous reports, the weak performance of the livestock sector was mainly due to the significant rise in input costs, both within the farm gate, in agroindustry, and in livestock-related agri-services.

In the primary segment, GDP grew but at a modest rate given the sharp increases in livestock and milk prices. In 2021, the increase in revenue for livestock activities did not translate into GDP growth due to even more significant rises in input costs. Moreover, the lower production of fat cattle also negatively influenced the livestock GDP. In agroindustry, the relationship between revenue and input costs was even more unfavorable due to the difficulties in passing on raw material price increases to final consumers due to weakened domestic demand. As a result, GDP in this segment declined for the year.

Overall, considering the strong performance of the agribusiness GDP in 2021, the sector reached a 27.4% share of Brazil’s GDP, the highest since 2004 (when it was 27.53%).

A4) AGRIBUSINESS GDP – METHODOLOGY

The Brazilian Agribusiness GDP Report is a monthly publication resulting from a partnership between the Center for Advanced Studies in Applied Economics (CEPEA), from Esalq/USP, the Brazilian Confederation of Agriculture and Livestock (CNA), and the Luiz de Queiroz Foundation for Agrarian Studies (FEALQ). Agribusiness is understood as the sum of four segments: inputs for agriculture and livestock, primary agricultural production (or primary sector), agribusiness (processing), and agriservices – as shown in the figure below. The analysis of this set of segments is conducted for both the agricultural (vegetal) and livestock (animal) branches. By summing them, with the appropriate weightings, the overall agribusiness analysis is obtained.

According to the methodology used by Cepea/Esalq-USP, the Agribusiness GDP is measured from the production perspective, i.e., by the Total Added Value (VA) of this sector in the economy. Additionally, the Added Value is assessed at market prices (indirect taxes minus product-related subsidies are considered). Therefore, the Brazilian Agribusiness GDP refers to the product generated systematically in the production of inputs for agriculture and livestock, in primary production, and extending to all other activities that process and distribute the product to its final destination. Income, in turn, is intended for the remuneration of production factors (land, capital, and labor).

After estimating the agribusiness GDP value for the base year (which, since January 2017, has referred to 2010), the evolution of this value is projected in order to generate a historical series. This is done through a comprehensive set of production and price indicators from research and government institutions. Whether for the annual estimation of GDP value or for monthly re-estimates of annual forecasts, information about the evolution of Gross Value of Production (VBP) and Intermediate Consumption (CI) of agribusiness segments is considered. By analyzing the joint evolution of VBP and CI, the growth of the added value from the sector is estimated.

Based on the procedures mentioned and additional processes carried out by Cepea, the calculations of the Agribusiness GDP result in two main indicators, which reflect the behavior of the sector from different perspectives:

• Agribusiness GDP-Income (equivalent to the previously published GDP by Cepea): Reflects the real income of the sector, considering variations in volume and real prices, deflated by the implicit deflator of the national GDP.
• Agribusiness GDP-Volume: Refers to the agribusiness GDP by the constant price criterion, showing only the variation in the volume of production. This is the GDP indicator comparable to the variations presented by the IBGE.

Monthly, the main focus of analysis is the Agribusiness GDP-Income, which reflects the real income of the sector. For textual convenience, the agribusiness GDP-Income is simply referred to as Agribusiness GDP throughout this report. It is important to note that the growth rates calculated for each period consider the same period of the previous year as the base, except for agricultural crop quantities, for which the crop forecast for the current year (compared to the previous year) is used.

It is also important to highlight that each report considers the available data – observed prices and annual production estimates – up until its completion. In future editions, as more up-to-date information is included, there is a possibility that the results may change, both regarding the current month and previous months and years. Therefore, it is recommended to always use the most updated report. For a more detailed analysis of the methodological aspects, as well as the results of other indicators (GDP-Volume, Intermediate Consumption, etc.), Read more: http://www.cepea.esalq.usp.br/br/pib-do-agronegocio-brasileiro.aspx