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Covid-19 crisis affects cassava sector in different ways

The Brazilian economy had not yet recovered completely from the 2015/16 recession when it was affected by the effects of covid-19 pandemics, which has started in March this year. Both industry and services were severely influenced; however, for agriculture, the impacts were smaller, mainly in the segments who operate in the international market.

 

As for the cassava producing chain (besides the agricultural segment, it is formed by starch and flour industries, which meets the domestic demand and has potential to explore international market niches), it has been affected in several ways.

 

Most recent data from FAO (Food and Agriculture Organization) show that, in 2018, Brazil was the fifth biggest cassava producer in the world, totaling 17.6 million tons. Cassava root is mostly cultivated by small producers, mainly family farmers, who are more vulnerable to the effects of covid-19.

 

In order to face this period and guarantee food security, the federal government has provided aid measures. One of them is the approval of the Law 13,987/2020, which allowed the distribution of food acquired by PNAE (National School Feeding Program) to families of school-age children during the period when classes are suspended.

 

Other actions were the allocation of 500 million BRL to the Food Acquisition Program (PAA) and the emergency aid of 600 BRL per family for five months (according to a report from Cepea, the emergency aid has increased income and reduced poverty in Brazil). These factors had positive effects on income maintenance of small producers and may help keeping the cassava root production stable, especially in the Northeast.

 

In the Central-South, on the other hand, cassava production is performed by bigger farmers and they use more technology. In these cases, because the scenario is more favorable for other agricultural activities related to the international market, some cassava areas had been replaced – but with low impact on the total area.

 

CASSAVA STARCH – Because it is used in a wide variety of products, this segment has been affected more significantly, with decreases in industrial production and sales in the retail market.

 

According to Cepea data, the apparent consumption of cassava starch from January to July amounted 316.8 thousand tons, 11% down compared to the same period last year and the lowest volume since 2017. The decrease, however, was limited by the good performance of cassava starch exports. Secex indicates that, from January to July this year, shipments increased 59% compared to the same period in 2019, influenced by high dollar quotes against Real.

 

The last Focus Survey, released by Brazil’s Central Bank, indicates that the Brazilian GDP may shrink 5.62% this year and industrial production, 7.87%. As a result, a lasting recovery in the demand for starch will depend on the improvement in this scenario – at least in the mid-term, it has not shown a consistent reaction.

 

CASSAVA FLOUR – The scenario for this byproduct is more favorable. In spite of recent benefits from the government, the possible increase of unemployment tends to reduce income and, consequently, the purchase power of the population. This scenario, in turn, favors flour consumption – this product is considered as an inferior good, with decrease in consumption as the income increases and vice-versa.

 

Apart from the intensity of the shock in each segment of the producing chain, there are still many uncertainties. The biggest ones are how long the crisis will last and to what extend it will respond to the economic policy instruments adopted. Agribusiness is expected to be stronger after the crisis, being a point of support for other sectors in the economy.

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