Brasília, 4/30/2004 - Brazil's agriculture sector GDP is expected to reach US$181.2 billion (R$ 537.7 billion) in 2004, an increase of 5.8% compared to 2003. The estimate was made by the National Agricultural Confederation (CNA) and the Center for Advanced Studies in Applied Economics at the University of São Paulo (Cepea/USP), in spite of the fact that sector revenue has actually fallen during the first months of this year.

In the first quarter, Gross (farm) Production Revenue (VBP) of the country's 25 main farm goods was around US$56.8 billion (R$168.8 billion), down from US$57.1 billion (R$169.7 billion) during the same period in 2003. According to the CNA, the reason for the drop was lower domestic consumption caused by a reduction in worker income. "Inflation surveys show that food prices have actually fallen. What is happening is that Brazilians are eating less because they have less money and that impacts farm revenue," says Getulio Pernambuco, the chief economist at the CNA. Pernambuco adds that there were problems with the weather and the Asian rust plague that attacked soybean crops, as well.

In his analysis of the situation, Pernambuco points out that the drop in farm sector revenue was not bigger only because of strong performance by exporters. In fact, farm sector exports in the first quarter, totalling US$2.6 billion (R$7.8 billion), were up 36.5% over the same period in 2003.

With regard to soybeans, Pernambuco says farmer revenue should rise as international prices are running 40% higher this year. However, he points out that some farmers sold this year's crop last year at last year's prices. "That was US$9.50 a sack. Today the price is US$15 a sack. Those guys will lose 50% if they honor their contracts," he said.

Pernambuco explained that higher prices for soybeans are due to more demand (around 172 million tons this year, compared to 165 million tons last year) and a smaller harvest in the US.

Translator: Allen Bennett