Brazil Must Protect its Agribusiness from Climate Impacts

If public policies continue to simply apply a “gambling” logic, betting that other factors will always be there to mitigate the negative impacts of climate change, the entire population will suffer

The activities underpinning all this—crop production and animal husbandry—are heavily impacted by climate change. T hese are activities that are highly dependent on ecosystem services provided by what, in economics, is referred to as the “natural capital” (the atmosphere, water resources, and biodiversity, among many other factors). One of the consequences of adverse climate impacts on our natural capital is the rise in food prices, a hot topic today across the country and around the world. Therefore, without proper adjustments in our policies for this sector, agriculture runs the risk of losing relevance to the Brazilian economy.

It is important to note that these unfavorable impacts of climate change on agricultural productivity are already a reality, and not a mere conjecture. In 2023, Valor Economico reported that, from 2013 to 2022, Brazil lost almost R$300 billion (~ US$ 62bi in 2023) as a result of extreme climate events—an amount exceeding 70 percent of the funds available under the 2024/25 Harvest Plan (Plano Safra).

Along the same lines, recent estimates from Brazil’s Institute of Applied Economic Research (IPEA) indicate that the sector’s systemic productivity gains (in terms of value added per hectare), which reached an impressive 4.2 percent per year between 1994 and 2011, advanced just 1.5 percent per year between 2012 and 2021 (latest data available). The main explanation comes from meteorological studies, which reveal that Brazil has been experiencing a chronic drought since 2012, with rainfall levels well below historical averages.

Studies carried out by FGV/GV Agro and EMBRAPA indicate that the “planting window” has already shrunk by approximately 30 days in most of Brazil. Southern states, particularly Rio Grande do Sul, have experienced crop losses in eight out of the past ten years. In 2025 alone, up to 80 percent of the soybean harvest may be lost (in the worst-case scenario) due to drought and extreme heat, including heat waves. Extreme climate events are also being observed in Brazil’s Midwest, which produces most of the soybean (47.1 percent) and corn (60 percent) in the country, just to mention two important crops. A 30-day reduction in the rainy season has a major impact on corn’s second harvest.

The first studies on agricultural losses published by EMBRAPA and UNICAMP, dating back to 2004, already indicated a growing vulnerability of some crops, in particular coffee. Those predictions were confirmed in a recent study by UNESP (Paulista State University). In the short term, some of the impacts are being mitigated by an extremely high market price for coffee, which raises farmers’ profit levels. However, if this situation persists, high prices could discourage consumption, reducing the future size of this market.

In fact, environmental and climate change impacts on agricultural production are often momentarily masked by other factors. Between 2020 and 2022, for example, international dollar prices for agricultural commodities rose by almost 60 percent, reflecting the disruptions caused by the pandemic and the outbreak of the war between Russia and Ukraine. However, since mid-2022, they have already fallen by almost 15 percent.

In the case of Brazil, this dynamic is further amplified by currency fluctuations, as most agricultural commodities are denominated in dollars. Since the pandemic, the Brazilian real has depreciated significantly, a factor that has increased the profitability (in local currency) for many Brazilian producers. This is unlikely to happen again, especially because estimates indicate that the Brazilian real is currently undervalued (many believe that R$4.90 per dollar would be a fair exchange rate). It is clear to anyone involved in the production of agricultural commodities that much of the bonanza observed in the past five years may be the result of sheer “luck”.

In this context, Brazil’s biggest challenge is related to integrating unfavorable climate forecasts into agricultural production projections. There will be an intensification of extreme weather events, with reduced rainfall in the Cerrado and the Amazon regions. In addition to these, continued degradation of the environment, with deforestation and loss of carbon in the soil, among other aspects is also expected.

From another perspective, we are also talking about food supply and, more importantly, food security. If public policies continue to simply apply a “gambling” logic, betting that other factors will always be there to mitigate the negative impacts of climate change, the entire population will suffer—not only in Brazil, but also globally. From the farmers’ perspective, this game would only be sustainable if final prices kept getting higher and higher.

We need to escape this trap, making the development of agricultural production compatible with an increase in food security, while ensuring quantity, quality, and affordable prices. This will only be possible if we are able to maintain the significant productivity gains observed in the sector up to the last decade, something that will require both mitigation and adaptation efforts to ensure increased resilience required by this sector.

Much of the technology and knowledge needed to do this is widely available. One idea is to change the period of recorded data to assess the risks of where, what, and when to plant. Likewise, it is imperative to adopt low-carbon agriculture practices, as well as regenerative agriculture and the incorporation of trees into the production system. These changes in policies and practices will place agriculture as an additional driver of sustainable economic and social development, in addition to enabling an increase in food security—a factor that, in turn, tends to contribute to reducing extreme poverty and political instability worldwide.

Bráulio Borges é economista da LCA e pesquisador do Ibre/FGV.
Eduardo Assad é pesquisador da FGV/GV Agro e diretor da Fauna Projetos.

This article was originally published in Valor Econômico.