When I looked at the balance on my IRA Monday morning—just after England had voted to part with the European Union— I started clipping grocery store coupons and considering a more draconian retirement. But Brexit’s effects on Brazil’s agriculture sector are likely to be close to nil in the short term, though potentially somewhat negative in the mid- and long-terms.
Here’s why. Many of Brazil’s top ag export commodities are also important U.S. export commodities, and many figure Britain’s exit from the E.U. is likely to speed along more bilateral trade not only with Britain’s Commonwealth countries, but with the United States. Take soybeans, corn, chicken, beef, pork and broilers—products Brazil specializes in exporting. Well, so does the United States. And Britain could quickly set up favorable trade deals with the United States now that the results of the Brexit vote there have begun to sink in, says consultant Fabio Silveira to Brazilian media.
In the short term, the value of the pound sterling and Britain’s credit rating have been doing their best to plunge even faster than the value of that IRA, thus making imports—including food and feed—that much more expensive to British consumers. With talk of a British recession in the wake of Brexit, British buyers may look to buy more meat from sellers like Brazil, whose currency is also falling. Meanwhile the U.S. dollar has been climbing against the pound sterling since the vote to separate from the EU. For now, that could make products like orange juice, coffee, beef, broilers, corn and soybeans—which, along with iron ore are big Brazilian export commodities, more attractive.
Rotterdam will likely continue to be a key grain import hub for the region, of course. And it could be that beef, pork and broiler exports will grow. EU member state Ireland, after all, was the source of a good deal of pressure to limit the bloc’s beef imports from Brazil. With England out of the EU, policymakers ought to face less pressure to limit such imports. Even facing such pressures, the United Kingdom imported nearly 9.8 million tonnes of meat (beef, pork, poultry, other) from Brazil in the first quarter of this year, at a value of nearly $44 million. Faced with a dollar that’s rising against the pound, British importers could snap up more cheap Brazilian product.
In the longer term, though, the pound could well recover and a special trade deal could be established with the U.S. to make up for any Brexit losses in the island country that imports almost half its food. At least that’s what U.S. farmers can hope for—sort of like the way I’m hoping that IRA recovers from the Brexit dip, even though it may take a while.
The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.