Frosts are expected to weigh on prices in the short term and push inflation to 7%

Frosts: The losses caused by the record cold in the countryside will soon reach the shelves and put pressure on inflation. Photo: Albari Rosa / Archives / Gazeta do Povo

The losses recorded in the field due to the appearance of frost since last week are not long in reaching the final price invoiced to the consumer and should reach the shelves, not only in vegetables and fruits, the crops most affected after coffee. The price of meat and milk is also expected to come under pressure due to damage to pastures, increased production costs and grain, which is used as food on farms – here the highlight is against corn. -season, already impacted by the historic drought.

Pressed by the increase in fuels and electricity, inflation could exceed 7% at the end of 2021, now driven by home food. The revised projection comes from XP, which expects the CPI to be 6.7% for the year. The forecast of higher levels is repeated in other institutions like Santander, which already speaks of 7.3% in the IPCA.

The midpoint of financial institutions projections in the Focus report, a poll conducted every week by BC, points to 6.56% inflation this year. This expectation has been high for 16 weeks.

According to economist Tatiana Nogueira of XP, the decline in product supply tends to push up prices, with transfers usually reaching consumers’ pockets quickly. “Although we have already partially incorporated this impact, this week’s freeze could translate into even higher inflation in the near term. We estimate that this could mean an increase of 0.1 percentage point in our inflation forecast for the year, already at 6.7%, ”he said in a report.

Nogueira believes that the intense cold this month worsens an already difficult scenario for the farmer in 2021. “The severe drought has had a strong impact on the prices of cereals (such as soybeans and corn), from cane to sugar, coffee and citrus. In addition, animal protein They also increased. The increase in beef is supported by Brazilian exports to China, causing a shortage of animals ready for slaughter. The lack of rain has accentuated the confinement of livestock, generating more costs for producers, ”he underlines. Pastures burned and parched by low temperatures add to this scenario.

Frequently used as a substitute for beef, chicken has also grown in recent months – 7.6% since March, according to the Brazilian Institute of Geography and Statistics (IBGE) – and should continue its upward trajectory in the second half, according to the specialist. of XP. . The reason is the increase in production costs (by 52%) and demand, which remains high.

Information from the National Meteorological System (SNM) indicates that the large frost formation reached the southern, southeastern and midwestern regions, with records in the three southern states, São Paulo, Rio de Janeiro, Minas Gerais and Mato Grosso do Sul due to the intense cold snap. It is still expected that the cold will repeat itself in the coming days.

The Ministry of Agriculture is monitoring the situation to assess possible measures to support farmers. According to the file, teams from the National Supply Company (Conab) are on the ground in the hardest-hit states looking for likely changes in production expectations of crops such as coffee, sugarcane and grains. , especially corn and wheat. The monitoring also covers loss of vegetables and fruits. Despite this, the ministry says there is no risk of product shortages.

According to an Itaú BBA assessment, crops such as coffee could still suffer future losses, with negative effects of the cold on the plantations (expected during the next flowering and fruit formation). Wheat and corn are likely to have greater problems at the points that have been reached when the crops have already reached the flowering stage, where they are more susceptible to frost.

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