Brazil’s agribusiness sector is starting to emerge from a nearly three-year slump as a recovery in crop prices, led by soybeans and sugar, improves the outlook for some of the country’s biggest farm companies.
The change in sentiment was evident at XP Investimentos’ third CEO Conference in Rio de Janeiro last week, where senior executives struck a more constructive tone than a year earlier, said Leonardo Alencar, XP’s analyst for agribusiness and food and beverage companies.
“The outlook is more favorable than it was a few months ago,” Alencar told The AgriBiz.
The turn does not mean the risks have gone away. Brazil’s benchmark Selic rate, at 14% a year, remains an Achilles’ heel. But tighter supply-demand balances in crops such as soybeans and sugarcane are giving companies more confidence for the rest of 2026.
Shares that had been largely ignored are starting to move. São Martinho jumped 26% in the week ended Aug. 21 after the sugar-and-ethanol producer’s bet on holding sugar and ethanol inventories began to pay off as prices recovered.
The improved backdrop prompted XP to change its call. On Aug. 21, Alencar and Leonardo Paiva upgraded São Martinho to buy and raised their price target by 51%, to $4.34 (22.40 reais) from $2.87 (14.80 reais), implying 21% upside from current prices.
Beyond Sugar
The shift is not limited to sugar and ethanol. Signs that soybean inventories are tightening are building a new consensus across the market.
Two weeks earlier, SLC Agrícola Chief Executive Officer Aurélio Pavinato had already said the worst was behind the company. The outlook is for margin improvement in 2027, a view backed on Aug. 21 by BTG Pactual analysts.
The mood is also changing in farm machinery. John Deere believes the worst of the cycle is ending. Expectations for a recovery in equipment sales helped send shares in the US company up more than 6% in the week ended Aug. 21.
Balance-Sheet Repair
Alencar said farmers still face a long road, especially grain growers that need to cut debt.
“If this scenario lasts longer, farmers will start reducing leverage, but it is a slow process. There is no immediate change,” he said.
For Alencar, the crisis of recent years carries a warning: To withstand the next shocks, farmers cannot take on too much leverage, as many did during the boom years of 2020, 2021 and 2022.
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff.
