Skip to content

Value Chain Analysis of the Agribusiness in Brazil.

Commercial Relationships

The agribusiness value chain in Brazil is characterized by a complex web of commercial relationships, linking diverse players from input suppliers to final consumers and supported by a robust services sector. These relationships vary significantly in nature, structure, and scale across the different stages of the chain, reflecting the specific needs, market dynamics, and power balances inherent in each segment.

In the Before the Gate (Antes da Porteira) step, commercial relationships are primarily transactional and B2B (Business-to-Business). Manufacturers of inputs such as fertilizers, pesticides, seeds, and machinery sell their products to distributors, cooperatives, and sometimes directly to large rural producers. Distributors and cooperatives, in turn, act as intermediaries, selling these inputs and equipment to a vast network of farmers and livestock producers across different regions of Brazil. Relationships can range from simple one-time purchases to longer-term supply contracts, often influenced by factors like credit availability, technical support offered by the supplier or distributor, and the specific needs of the production cycle. Large producers may negotiate directly with manufacturers or major distributors for bulk purchases, leveraging their scale for better pricing and terms. Smaller producers often rely on cooperatives and local retailers, who may also provide credit and technical assistance, fostering closer, though still commercially driven, relationships. The sale of technology and innovation services often involves direct contracts between agritech companies, consultants, or research institutions and producers, providing software, hardware, data analysis, or specialized advice on a fee-for-service or subscription basis.

Moving into the Within the Gate (Dentro da Porteira) step, the commercial relationships shift, primarily involving producers selling their raw agricultural and livestock products. Producers engage in selling activities with various buyers, including processing plants, cooperatives, wholesalers, and sometimes directly to retailers or consumers (e.g., through farmers' markets or specialized supply chains). For major commodities like soybeans, corn, and sugarcane, relationships are often established with large agroindustries or trading companies through forward contracts negotiated before or during the planting season, guaranteeing a buyer and sometimes a price floor, thus reducing price risk for the producer. Livestock producers, especially in poultry and swine, often participate in integration systems where agroindustries (like JBS or BRF) provide inputs (feed, chicks/piglets) and technical assistance, while the producer is responsible for raising the animals, which are then sold back to the integrating company under predefined contractual terms. For other products, sales might occur through spot markets (e.g., regional auctions for cattle), direct negotiations with local processors or wholesalers, or through cooperatives that aggregate the production of multiple members to gain greater negotiating power.

The After the Gate (Depois da Porteira) step involves agroindustries purchasing raw materials from producers and selling processed products. Agroindustries have strong purchasing relationships with primary producers, often through contracts, cooperatives, or direct procurement teams. These relationships are crucial for ensuring a steady supply of raw materials meeting specific quality and quantity requirements. For processed food products, beverages, and other manufactured goods derived from agricultural products, agroindustries sell to wholesalers, large retail chains (supermarkets, hypermarkets, atacarejos), food service companies (restaurants, hotels), and industrial clients. Sales to large retailers often involve complex negotiations regarding volume, pricing, packaging, logistics, and marketing support. For export markets, agroindustries sell to international buyers, importers, and distributors, navigating international trade regulations and standards. The relationships here are predominantly B2B, involving sales contracts, supply agreements, and participation in tenders or international trade platforms.

In the Distribution and Logistics step, commercial relationships facilitate the movement and storage of products and inputs. Transportation companies contract with input manufacturers, producers, agroindustries, and retailers to move goods. Storage and warehousing providers offer services to players at various stages, storing inputs, raw materials, or finished products under specific conditions, typically based on service contracts. Wholesalers purchase from agroindustries and producers, selling to retailers and food service providers. Retailers, particularly large chains, establish direct purchasing relationships with agroindustries and wholesalers, negotiating terms for stocking their stores. The relationship between retailers and consumers is the final commercial interaction, involving the sale of products at points of sale (physical stores, online platforms). This relationship is consumer-driven, influenced by price, convenience, quality, and brand perception.

Finally, Agrosservices providers engage in commercial relationships with players across all stages of the value chain. Technical consultants and consulting firms sell their expertise to producers and agroindustries on a fee basis. Financial institutions provide loans, insurance, and other financial products to producers, processors, and distributors, operating within regulated financial markets. Research and development institutions, while often publicly funded (like Embrapa), may also engage in commercial partnerships for technology transfer or licensing. Education and training providers offer courses and programs for a fee. Certification bodies and laboratories provide auditing and testing services for a fee to ensure compliance with quality and sustainability standards. These relationships are service-oriented, based on contracts, fees for service, interest payments, and regulatory compliance.

Products and Services Exchanged

The Brazilian agribusiness value chain involves a vast array of products and services exchanged at each step, forming the tangible flow of value from primary production to final consumption.

In the Before the Gate step, the primary products and services exchanged are the essential inputs for agricultural and livestock production. This includes a wide variety of fertilizers (nitrogen, phosphorus, potassium, micronutrients) in different formulations (granules, liquids), crucial for soil fertility and plant nutrition. Pesticides (herbicides, insecticides, fungicides) are exchanged to protect crops from pests and diseases. Seeds of various crops, including genetically modified and conventional varieties, are fundamental inputs carrying genetic potential for yield and resistance. The agricultural machinery and equipment exchanged ranges from large tractors, harvesters, and planters to irrigation systems, sprayers, and smaller implements, often accompanied by maintenance services and spare parts. In the animal health and nutrition segment, the products are animal feed (concentrates, supplements), veterinary medicines (vaccines, antibiotics), and other animal health products. The technology and innovation segment provides software for farm management, precision agriculture hardware (GPS devices, sensors, drones), data analysis services, and technical consulting on optimizing production practices and adopting new technologies.

Moving to the Within the Gate step, the main products are the raw agricultural and livestock commodities produced on farms. This includes grains (soybeans, corn, wheat), oilseeds (soybeans, sunflower), fibers (cotton), fruits (oranges, apples, bananas), vegetables, sugarcane, coffee beans, and other plant-based products. From livestock production, the products are live animals (cattle, poultry, swine), meat (beef, chicken, pork), milk, and eggs. Forestry yields wood (logs, timber) and other forest products. Aquaculture produces fish, shrimp, and other aquatic organisms. These raw materials are the direct output of the primary production stage and serve as inputs for the subsequent processing step.

The After the Gate step transforms these raw materials into processed goods. In the agroindustry segment, products include a vast range of processed foods (flours, oils, sugar, juices, processed meats, dairy products, baked goods, canned goods), beverages (juices, alcoholic beverages derived from agricultural products), and animal products (packaged meat cuts, dairy products, processed eggs). The textile industry produces textile fibers and fabrics from natural fibers like cotton. Bioenergy production results in biofuels such as ethanol (from sugarcane or corn) and biodiesel (from soybeans or other oilseeds). The pulp and paper industry generates wood pulp and various types of paper products. These processed products represent added value derived from the raw commodities.

In the Distribution and Logistics step, the primary "products" exchanged are the movement and storage of goods. Transportation services involve the physical carriage of inputs, raw materials, and finished products using trucks, trains, vessels, or other modes. Storage and warehousing services provide the physical space and conditions necessary to hold products at various points, including grain silos, cold storage facilities for perishable goods, and general warehouses. Wholesalers exchange large volumes of processed or raw products with retailers and institutions. Retailers exchange a wide variety of food and agribusiness-related products with final consumers. The "product" in retail is the accessible and convenient availability of goods for consumer purchase.

The Consumption step involves the final exchange where consumers acquire and utilize the products. Households purchase food items, textiles, and other agribusiness products. Food service establishments purchase ingredients and processed foods to prepare meals for customers. Industrial consumers acquire agricultural raw materials or semi-processed goods as inputs for their own manufacturing processes (e.g., using sugar in confectionery, cotton in textiles). Export markets involve the exchange of a wide range of Brazilian agricultural commodities and processed products with international buyers.

Finally, Agrosservices involve the exchange of intangible services that support the entire chain. This includes technical advice, management consulting, financial products (loans, insurance), research findings, educational programs, certification and quality control reports, and government support and regulatory services. These services are crucial for improving efficiency, managing risks, fostering innovation, ensuring quality, and providing a stable operating environment for the agribusiness sector.

Business Models

The business models employed throughout the Brazilian agribusiness value chain are diverse, reflecting the specific characteristics of each stage and the types of relationships between players.

In the Before the Gate stage, suppliers of inputs and machinery often operate on a manufacturer-distributor model. Large international and national manufacturers produce inputs and equipment and sell them to a network of regional or local distributors and cooperatives. These distributors operate on a wholesale/retail model, purchasing in bulk and selling in smaller quantities to producers, often extending credit as part of their service. Direct sales models also exist, particularly for large producers buying high volumes or specialized equipment directly from manufacturers or their official dealerships. Agritech companies and technology providers often use subscription models (for software and data platforms), fee-for-service models (for consulting or data analysis), or hardware sales models (for sensors, drones, etc.). Financial institutions operate on a traditional banking model, providing loans with interest, and insurance models, collecting premiums to cover risks.

In the Within the Gate stage, primary producers employ various business models depending on their scale, product, and market access. Many operate on a commodity production model, focusing on maximizing yield of major crops or livestock for sale on the open market or through pre-negotiated contracts. Contract farming (integration) is a prominent model in poultry and swine, where producers raise animals owned by or supplied by an integrating agroindustry under strict technical and commercial terms, receiving payment based on performance. Cooperative models are significant, where producers pool their resources for purchasing inputs, marketing production, and sometimes processing, gaining collective bargaining power. Family farming models often involve direct sales to local markets, consumers, or smaller processors, sometimes employing more diversified production systems.

The After the Gate stage, dominated by agroindustries, utilizes processing and manufacturing models. Companies purchase raw materials and transform them, adding value through various processes. Their sales models include wholesale to distributors and retailers, direct sales to large industrial clients, and export models for international markets. Large meat processors like JBS and BRF operate highly integrated models, often including their own livestock production (or integration systems), slaughterhouses, processing plants, and distribution networks.

The Distribution and Logistics stage involves various service-based models. Transportation companies operate on freight models, charging based on distance, weight, and type of cargo. Storage and warehousing providers use leasing or fee-per-volume/time models. Wholesalers operate on a buy-and-sell model, profiting from the margin between their purchase price from processors/producers and their selling price to retailers/food service. Retailers utilize a traditional retail model, purchasing goods and selling them directly to consumers with a markup, increasingly incorporating omnichannel models that combine physical stores with e-commerce platforms. The rise of atacarejo (cash and carry) models in Brazil reflects a hybrid approach targeting both end consumers and smaller businesses.

The Consumption stage, while primarily driven by consumer behavior, involves business models for those providing products and services to consumers. Restaurants and food service providers operate on a service model, purchasing ingredients and selling prepared meals. Industrial consumers operate on manufacturing models, where agricultural products are inputs. Export markets function through various international trade models, including direct sales to foreign buyers, sales through brokers or trading companies, and participation in international commodity markets.

Agrosservices are delivered through various service provision models. Technical consultants and training providers use fee-based models (per service, per hour, per project). Financial institutions offer loan products (with interest) and insurance policies (with premiums). Research institutions may engage in licensing models for technologies developed. Certification bodies use auditing and certification fee models.

Bottlenecks and Challenges

Despite being a powerhouse in global agribusiness, the Brazilian value chain faces significant bottlenecks and challenges that impact its efficiency, competitiveness, and sustainability.

One of the most critical and consistently cited bottlenecks is the logistics and infrastructure deficiency. Brazil heavily relies on road transport, which is often inefficient and costly due to poor road conditions, long distances between production areas and ports/markets, and congestion. This increases freight costs, leads to product losses and damage during transit, and creates bottlenecks during peak harvest seasons when the volume of commodities needing to be transported overwhelms the available infrastructure. While investments in railways and waterways are being made, the modal matrix remains imbalanced. Furthermore, there is a significant deficit in storage capacity, particularly for grains, forcing producers to sell their products immediately after harvest at potentially unfavorable prices due to lack of on-farm or nearby storage options. This limits their ability to store production and wait for better market conditions.

Climate change and increasing frequency of extreme weather events pose a major and growing challenge. Irregular rainfall patterns, prolonged droughts in key agricultural regions, and severe flooding (as experienced in Rio Grande do Sul in 2024) directly impact crop yields and livestock productivity, leading to significant financial losses for producers and instability in supply chains. Managing the risks associated with climate variability requires significant investment in irrigation, drainage, and climate-resilient practices, which can be a barrier for many producers.

The high cost of production is another persistent challenge. Producers face rising expenses for inputs, particularly fertilizers and pesticides, a significant portion of which are imported and subject to exchange rate fluctuations. The cost of machinery, fuel, and labor also contributes to the overall production cost, squeezing profit margins, especially for small and medium-sized producers.

Access to credit and high interest rates can limit producers' ability to invest in necessary technology, equipment, and infrastructure improvements. While government credit lines exist, bureaucratic hurdles and market interest rates can make financing expensive and difficult to obtain for many, hindering modernization and expansion.

Regulatory and environmental demands are becoming increasingly stringent, both domestically and internationally. Producers and companies throughout the value chain face pressure to adopt more sustainable practices, reduce deforestation, comply with labor laws, and meet traceability requirements from importing countries. Adapting to these demands often requires significant investments in technology, certifications, and management systems, posing a challenge, particularly for smaller players who may lack the resources and technical knowledge.

Market volatility and international competition expose Brazilian agribusiness to price fluctuations in global commodity markets. While Brazil is a major player, changes in global supply and demand, trade policies, and currency exchange rates can significantly impact the profitability of exports. Competition from other agricultural exporting countries also requires continuous efforts to maintain competitiveness in terms of price, quality, and sustainability.

Finally, addressing food loss and waste throughout the value chain is a significant challenge. Losses occur during harvesting, handling, transportation, processing, and distribution due to inadequate technology, inefficient practices, and insufficient infrastructure. Reducing waste requires improvements across multiple stages and greater integration among value chain participants.

These bottlenecks are interconnected. For instance, poor infrastructure increases the cost of inputs and reduces the competitiveness of products, while climate events exacerbate production risks, potentially limiting access to credit. Addressing these challenges requires coordinated efforts involving government policies, private sector investment, technological adoption, and collaboration among all actors in the value chain.

References