Back to Basics: Lessons from Brazil's Agri-input Market Transformation in 2024 and Road Ahead

In a year marked by turbulence and transformation, Brazil’s agricultural input market has emerged as a case study in resilience and reinvention. As the sector grapples with climatic challenges, shifting distribution dynamics, and the rise of innovative models, understanding these changes is critical for stakeholders navigating this complex landscape. In this exclusive AgroPages interview, we sit down with Renato Seraphim - a seasoned industry leader, former CEO, and board member renowned for his expertise in agri-tech and innovation - to dissect the pivotal shifts of 2024 and their implications for the future.

Seraphim’s insights reveal a market in flux. From the unraveling of overambitious consolidation strategies to the resurgence of farmer-centric, localized models, his analysis underscores a return to fundamentals: expertise, relationships, and adaptability. He highlights the pitfalls of prioritizing corporate agendas over cash flow and farmer needs, while celebrating nimble players like Paulo Assunção’s agronomy-driven service and Ouro Safra’s export-savvy approach. The discussion also delves into the burgeoning biologicals sector, where differentiation and quality are emerging as non-negotiables, and the challenges facing international entrants in Brazil’s high-cost, high-reward market.

Looking ahead, Seraphim envisions a hybrid future - where cooperatives thrive, digital adoption accelerates, and agronomists reclaim their role as trusted advisors. For companies eyeing growth, his advice is unequivocal: innovate, streamline, and invest in talent.  

This interview is a must-read for anyone invested in Brazil’s agricultural ecosystem. Seraphim’s candid reflections offer not just a diagnosis of 2024’s trials but a roadmap for sustainable success - one rooted in simplicity, farmer trust, and the timeless wisdom of ″rice and beans″ execution.

Renato Cesar Seraphim

Speaker, Board Member, Especialista em Tecnologia e Inovação no Agro (Former CEO Albaugh / Agro100 / Ciarama Maquinas)

You've closely monitored Brazil's agricultural input market throughout 2024. What would you say were the most significant structural changes in the market this year?

In 2024, Brazil's agribusiness sector underwent significant transformations. Adverse weather conditions in some regions negatively impacted productivity, leading to reduced profitability for Brazilian farmers, particularly those growing grains. Additionally, there was a noticeable lack of strategic vision from the government, which seemed disconnected from the needs of agribusiness and unclear about its direction.

One of the most striking changes was the disruption in the distribution model. The consolidation trend took a step back, with judicial recoveries, store closures, and asset sales becoming more common. This shift brought the sector back to basics, emphasizing the importance of traditional practices and the role of founders and individuals who deeply understand the needs of farmers. Essentially, the market returned to a "back-to-basics" approach, where expertise and personal relationships with farmers regained prominence.

The judicial recovery of AgroGalaxy marked a turning point for large distributors. In your analysis, what were the key factors that led to the failure of the consolidation model pursued by these large distribution groups?

The consolidation model failed because it did not account for the tight margins inherent to distributors, prioritizing EBITDA and multiple expansion over cash flow management, which is far more critical in this sector. Heavy and overly verticalized structures were created, where the farmer’s needs became an afterthought. The corporate agenda was driven more by investor expectations than by a genuine focus on the business itself, ultimately leading to the system’s collapse.

Additional factors included frequent leadership changes, with new executives lacking deep market knowledge, and high turnover rates within the commercial teams. Expansion was driven more by ego and less by actual market demand, further exacerbating the issues. These missteps highlight the importance of aligning business strategies with the realities of the agricultural sector and maintaining a farmer-centric approach.

I would like to emphasize that these mistakes have been made in the past by the same distributors that were acquired by these larger companies, and some of them are still struggling to recover. A case I often reference is Campofert, a distributor from São Paulo. They experienced rapid growth, excessive spending, and a significant increase in SG&A (Selling, General, and Administrative) costs - mistakes that ultimately cost them dearly. These are the same issues we are now seeing with some of the major distributors.

While we've seen some major distributors struggle, there seem to be success stories among smaller, more specialized players. Could you share an example of a company that has successfully adapted to the new market dynamics and explain what sets them apart?

I’m particularly impressed by two models that are thriving in Brazil, both of which are deeply focused on the farmer’s needs. The first is a model created by Paulo Assunção, an agronomist in Mato Grosso. Paulo successfully identified the key needs of farmers: producing efficiently, achieving profitability, reducing risks, and ensuring effective commercialization. His approach is centered on understanding the entire agricultural cycle. He provides farmers with access to cutting-edge technologies, tailors input purchases to their specific needs while ensuring competitiveness, and delivers high-quality technical assistance. This holistic approach has made his model highly effective and farmer-centric.

The second model I admire is that of Ouro Safra, a distributor located in the interior of São Paulo. Their strength lies in their expertise in commercialization and export, combined with a team that truly understands the business. They’ve built a company that grows sustainably, expands cautiously, and maintains a strong focus on quality. Their success is rooted in their deep market knowledge and their ability to adapt to the evolving needs of farmers.

Both examples highlight how a farmer-first approach, combined with specialized expertise and strategic execution, can lead to sustainable growth in today’s challenging market.

We're seeing increased interest from Indian companies entering the Brazilian market. Based on your observations, what are the critical success factors for these new entrants, and what common pitfalls should they avoid?

It’s not just Indian companies; I’ve also noticed growing interest from Argentinian, Paraguayan, Russian firms looking to enter the Brazilian market. Our market is vast and will continue to grow, but my advice to these newcomers is to thoroughly understand the market and make strategic decisions about where and how to enter.

The biggest challenges they will face include the high operational costs in Brazil, a bureaucratic and expensive regulatory environment, and, most importantly, the cost of capital. Unlike in some other countries, the Brazilian government does not provide direct financing to farmers; instead, it supports by the industry. This means that companies entering the market must be prepared to front both products and capital, as well as be ready to manage the inherent risks of the business.

To succeed, new entrants should focus on building strong local partnerships, understanding the unique needs of Brazilian farmers, and developing a long-term strategy that accounts for the complexities of the market. Those who can navigate these challenges while maintaining flexibility and resilience will be better positioned to thrive.

The biologicals sector has shown remarkable growth in Brazil during 2024. What distinguishes the successful players in this segment from those who have struggled to gain traction?

The biologicals market in Brazil is growing rapidly and will continue to expand. However, one of the biggest challenges I see today is the low barrier to entry. With minimal capital, almost anyone can set up a factory and start selling products, which has led to a decline in market quality and reliability.

The key challenge for companies in this sector is to develop truly differentiated products that deliver consistent results for farmers. In my opinion, the only company currently achieving this is Chr. Hansen, which stands out for its innovative and high-quality products. Their ability to combine innovation with consistent performance sets them apart from others in the market. 

Successful players in this segment will need to focus on research and development, build trust with farmers through reliable results, and maintain high standards of quality. Those who fail to differentiate themselves or prioritize short-term gains over long-term value will struggle to gain traction in this competitive and evolving market.

Given the market's transformation in 2024, what structural changes do you anticipate in Brazil's agricultural input distribution system over the next few years?

I foresee several key changes in Brazil’s agricultural input distribution system. First, cooperatives will likely grow even stronger due to their vertical integration and the benefits they can directly pass on to farmers. Second, there will be a return to models where the role of agronomists and business owners becomes more prominent, emphasizing personalized service and expertise.

Additionally, I expect to see a significant rise in digital sales for more commoditized products. Technology is transforming agriculture, and farmers - increasingly younger and more innovative - are embracing these changes. Companies that can simplify technology and make it accessible to this new generation of farmers will come out ahead. I call this the "TikTok effect": delivering simple, fast, and clear messages that resonate with today’s tech-savvy agricultural community.

In summary, the future will favor those who combine the strengths of traditional models - like cooperatives and expert-driven services - with the efficiency and accessibility of digital innovation.

For companies looking to enter or expand in the Brazilian market now, what would be your key piece of advice based on the lessons learned from 2024?

In my view, the foundation for any company aiming to enter or expand in this market successfully remains the same: differentiated and innovative products, efficient processes to deliver quality and speed to farmers, and, most importantly, skilled people.

Brazil is currently facing a significant labor shortage, particularly in specialized roles, so companies must continuously raise the bar for performance. Investing in talent development and retaining skilled professionals will be critical. Additionally, understanding the unique needs of Brazilian farmers and adapting to the local market dynamics - while maintaining a focus on innovation and operational excellence - will set successful companies apart.

In short, the key to thriving in Brazil’s agricultural market lies in combining cutting-edge products, streamlined processes, and a highly capable team to meet the evolving demands of this competitive and dynamic sector.

As we look ahead to 2025, what indicators should industry watchers monitor to gauge the health and direction of Brazil's agricultural input market?

There are several key indicators that I consider essential for evaluating the health and direction of Brazil’s agricultural input market, based on my experience leading businesses:

Traditional Financial Metrics: These provide insights into the quality of the business, such as margins, EBITDA, and, most importantly, cash flow. Cash flow is particularly critical in a market where liquidity and financial stability are paramount.

Commercial Performance Indicators: Metrics like market share and Net Promoter Score (NPS) are vital for understanding a company’s competitive position and customer satisfaction levels. These reflect how well a business is meeting the needs of farmers.

Human Capital Indicators: Metrics such as Organizational Health Index (OHI) and employee turnover rates are crucial for assessing the strength and stability of a company’s workforce. A skilled and motivated team is essential for long-term success.

At the end of the day, our customers - farmers - are straightforward and value simplicity. Companies that think and act in a clear, simple, and farmer-centric way will be the ones that thrive in this market.

Based on your observations of successful and failed cases in 2024, what do you believe will be the most sustainable business model for agricultural input distribution in Brazil going forward?

I believe the most sustainable and successful business model will be a return to the basics - what I call the "rice and beans" approach. This model relies on skilled professionals who deeply understand their customers and the local region, combined with effective risk management. Today, there are numerous tools and companies that can help distributors manage risks more efficiently.

The key is to stay close to the customer, maintain a consistent routine, and recognize that farmers follow a simple journey: investigation, planning, product use, and results. While outcomes won’t always be positive, it’s crucial to stand by the farmer, regardless of the results. Farmers are perennial - they are the backbone of the industry - and building long-term trust with them is essential.

In short, the most sustainable model will prioritize local expertise, customer proximity, risk management, and farmer support. Companies that embrace these principles will thrive in Brazil’s agricultural input distribution market.

This article was published in the magazine of 2024 Annual Review. Follow this magazine to read more articles/stories.

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