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There’s a lot of talk that Brazilian agribusiness is in crisis, but it’s important to calmly evaluate the factors that lead us to this assessment. It is true that the 2023/24 cycle may have been the worst harvest year of the decade. Specifically, the calendar year 2023 was extremely challenging for all the players in our market. Farmers, agricultural input distributors and, consequently, the industry, had to look inwards at their businesses and recalculate the route.
In this scenario, a short timeline is necessary to align expectations and keep a positive outlook for the future. Between fiscal years 2021 and 2022, the entire chain experienced a moment of great euphoria, in which farmers’ margins reached peaks of 40%, something totally out of the curve when we look at agribusiness as a sector that has already recorded a history of strength for the Brazilian economy for some years, with high representativeness in GDP and excellent results recorded with exports.
However, the Covid-19 pandemic and its repercussions, combined with external factors such as the war between Russia and Ukraine, as well as domestic and global macroeconomic issues and extreme weather events, took the entire sector by surprise and consequently reduced farmers’ margins to levels well below the historical series.
One way of making these impacts tangible is by evaluating the devaluation of our main commodities. Between August 2021 and August 2024, the price of a sack of soybeans fell by around 26% and that of a sack of corn by almost 40%, when analyzing the Cepea/Esalq Paraná and Esalq/B3 indicators, respectively (in recent times, a similar drop had only occurred between 2014 and 2016). The dispute between Russia and Ukraine is the tip of an iceberg that justifies the high level of fertilizer stocks accumulated by large and small distributors throughout Brazil and which, to this day, is a point of attention in the companies’ financial statements. Rising default rates among rural producers, as well as requests for judicial recovery, have also become recurring themes in the sector.
But should we be hopeful for what will come from now on, when we can understand the path, we’ve traveled and the hard lessons we’ve learned during this period? I always say that hope alone is a bad strategy. Resources will never be enough if they are poorly managed. Just believing in tomorrow will not lead us to the long-awaited (and necessary) recovery. The lack of predictability erodes credibility, unfortunately. We need to plan and execute more efficiently.
For agribusiness to get back on track, therefore, it is important to align strategies and understand that the 2024/25 cycle will still be one of adjustments and reduced margins. However, I believe that the effects of the work done by good management will already be felt in 2025/26.
When I talk about good management, I’m thinking of simple good practices that can (and should) be applied to any type of commercial enterprise. Buying and selling better, guaranteeing the best product mix, maintaining a solid portfolio of partner suppliers and understanding the needs of end customers, who are increasingly sophisticated and technologized, are basic rules for any type of business, whether it’s a neighborhood store or a large agricultural input distributor.
Let’s replace mere hope with hard work, which is already a characteristic, and has been in the DNA of our agribusiness since its origins. Now it’s time to plant. We’ll harvest in the next cycle.
*Ruy Cunha has been CEO of Lavoro Agro since June 2022 and leads the distribution and manufacturing of inputs in Brazil and South America. Ruy was also a member of the company’s board of directors for around five years, as well as having previously served as Lavoro Brasil’s president, COO and CTO. Prior to Lavoro, Ruy held executive positions at AGCO, including head of the Sugarcane Business Unit and Strategy and Integration Director for South America. In his 25-year career, he has worked as an executive and consultant in Agribusiness, Automotive, Retail and Consumer Goods companies. He has a degree in Mechanical Engineering from EE Mauá, a specialization in Business Administration from FGV (CEAG) and a master’s degree in Business Administration from Northwestern University (Kellogg).
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