(Sérgio C. Trindade – Strindade@alum.mit.edu)
2. Climate change and global warming are real and seriously threaten the continued growth and profitability of all agribusinesses, including Brazilian agribusiness.
3. Added value is one risk management strategy of Brazilian agribusiness and involves developing new and disruptive technologies, new products and services, new markets and alternative financing. Information technology and its application in all facets of agribusiness, in Brazil and abroad, will be crucial to their competitiveness and profitability going forward.
Brazilian Agribusiness Scale:
Brazilian agribusiness represents about 20% of its GDP. The activity is increasingly intensive in technology, with an emphasis on information technology applied to agribusiness equipment, which requires more qualified labor.
Total Brazilian grain production now reaches around 200 million tons / year. After the US and the European Union, Brazil is the world’s third largest agricultural exporter.
Brazil is the world’s largest exporter of beef (30%), chicken (40%), sugar (45%), orange juice (86%), ethanol (52%) and coffee (32%).
It is the second largest exporter of soybeans (40%), the third of corn (10%) and the fourth of pork (12%).
Agribusiness success and challenges
Brazilian agribusiness is one of the few positive sectors of the economy, recently. It resulted from a process of five decades of paradigm shift in Brazilian agriculture through governmental and private initiatives that promoted quality postgraduate education, the creation of a new and broad research framework leading to technological innovation, credit support to respond to domestic and, above all, global demand for food.
The continuity of the process is not guaranteed. Climate change and global warming and their effects are already a serious risk to the growth and profitability of Brazilian agribusiness. This risk tends to accentuate if the signatories to the Paris Agreement – Conference of the Parties COP21 – do not take seriously the obligations they contracted in December 2015.
Climate change is serious risk for Brazilian agribusiness
Despite the disbelief of some, climate change and corresponding global warming are a challenging reality, particularly in the latitude range where Brazil is located. The consequences may be lower productivity and profitability. Value added to agribusiness is an important part of managing the risks posed by this challenge. Agribusiness can and should mobilize, nationally and globally, to establish policies that promote the mitigation of greenhouse gas emissions – GHG and adaptation to the effects of climate change.
According to the Intergovernmental Panel on Climate Change (IPCC), if there is no proactive human action, the average global temperature in 2100 may rise by 4.5 ° C! It sounds like little, but it will be catastrophic for life on earth, as we know it today. If proposals by countries at COP21 are adopted, that temperature will rise by 3.5 ° C, which is still reckless. The goal proposed to the countries in Paris was a maximum elevation of 2 ° C, and even better if it was 1.5 ° C.
Brazil committed itself to reducing emissions by 37% by 2025 and considered a reduction of 43% by 2030 compared to 2005 figures. In pursuit of this goal, the country pledged to reduce illegal deforestation in the Amazon to zero, recovering 12 million hectares of deforested areas and to increase the use of renewable energies, consuming 50 million cubic meters of biofuels by 2030.
More than 55 countries, accounting for at least 55% of global emissions, formally ratified COP21 results. However, it will be necessary to transform these approvals into public policies and broader agreements among the relevant stakeholders in Brazilian society in order to make an effective contribution.
The average temperature has risen more rapidly in the higher latitudes, approaching the poles of the earth. The melting of part of permafrost poses huge environmental risks, such as the release of carbon dioxide and methane into the atmosphere and the re-entry of bacteria and other microorganisms into ecosystems with damage to public and animal health. In the middle latitudes, there may even be a benefit of global warming by the extension of agricultural production and harvest seasons. In the Brazilian latitudes, global warming could have a negative effect on agribusiness.
Aggregate value in large and small-scale: Producing more with less
The productivity increase already achieved in Brazilian agriculture in the last decades was extraordinary and was achieved by the incorporation of capital and technologies, including more qualified human resources. Greater knowledge and information resulted in greater production in the same cultivated area, higher productivity and second and third harvests.
The opportunities to add value to agribusiness become clearer when examining the extension of the production chain, from the field to the final consumer around the world. Considering besides the production of the agricultural good, the various logistical and infrastructures, distribution and supply chains, financial services, creative use of insurance, marketing, futures and options markets, end consumer services, transformations of the agricultural good in other goods and services, alternative uses of assets, such as land and infrastructures, access to water and other inputs, and national and international transportation.
The future of Brazilian agribusiness
• Immense growth opportunities
The long-term demand for products and agribusiness services can only grow and there are few countries in the world with Brazil’s potential to meet this demand, domestic and international.
• Greater control over their own future
Since colonial times, when Brazilian agricultural commodities, such as sugar and coffee, flowed into international markets through traders and intermediaries who took away much of the value added to the final price, Brazil has evolved considerably in this domain.
For this trend to continue, there is a need to develop a better understanding of market intelligence and strategies of value creation in niche markets, beyond the traditional commodity markets, which will remain important.
In fact, the oscillating profitability of large-scale markets such as commodities, can, in the good years, provide funds for the development of niche markets, as long as exploration and implementation of niche markets.
• Investment in intensive factors
To provide continuity to the success of Brazilian agribusiness, It will be important to continue to invest in critical factors such as education, training, knowledge, information, research and development, and market intelligence. Overall, this effort will promote the emergence of disruptive innovation, which could help consolidate and expand the global dominance Of Brazilian agribusiness
• Adaptation, resilience and pro-activity
The challenges to agribusiness are constantly changing over time. Therefore, in the future, the successful agribusiness will be the one able to anticipate the challenges that will surely come, adapting to change and being proactive and resilient in the face of changing circumstances. Among the plethora of challenges to face, agribusiness should pay particular attention to climate change and its impacts on sustainability.