New Challenges Driving Transformations in Latin America’s Agricultural Sector
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By Javier Chavarro
The year 2025 marks the conclusion of the first quarter of the 21st century, a pivotal point in Latin America’s agricultural evolution. Over the past two decades, the region has undergone significant agricultural adjustment and development, transforming its food systems and agricultural landscape.
According to the World Bank, Latin America’s agricultural and food systems have become globally recognized as some of the most successful in the world. These systems have played a critical role in feeding a rapidly growing population, contributing to sustainable economic development, and supporting urbanization. Moreover, the region’s agricultural output has generated substantial export revenues, positioning Latin America as a key player in global markets.
Beyond economic growth, these advancements have had a profound social impact, helping to alleviate hunger and reduce poverty not only within the region but across the globe. As the world continues to face new challenges related to food security, climate change, and economic inequality, Latin America’s agricultural success story serves as a model of resilience and innovation, demonstrating the potential of well-managed agricultural systems to drive positive change on a global scale.
“Latin America has become the world’s breadbasket and lungs,” said Michael Morris, Lead Economist for Agriculture at the World Bank, and the numbers confirm this. The agri-food industry is important for many of the regional economies, accounting for between 5% and 18% of GDP in 20 Latin American countries, and an even larger proportion if the broader contribution of all food systems is considered.
Inflation, Reserves, and Commodity Prices
In 2024, Latin American agriculture faced a series of challenges that significantly impacted the region’s food systems and agricultural productivity. Food inflation surged, putting pressure on both consumers and producers, while simultaneously reducing purchasing power and increasing production costs across the sector.
The region also experienced a notable decline in cereal reserves, which led to concerns about food security, particularly for countries heavily reliant on staple crops such as maize and wheat. This shortage of reserves compounded the difficulties faced by local farmers and agricultural industries, limiting their ability to meet growing demand and raise concerns about potential shortages in key commodities. Additionally, the global agricultural market experienced a downturn, with international prices for some products falling sharply.
This price decline created a volatile market environment, affecting export revenues and diminishing the profitability of certain crops, especially for countries that depend on agricultural exports as a major source of income. As a result, Latin American agriculture had to navigate a complex landscape of rising costs, reduced reserves, and fluctuating global market conditions, which required adaptive strategies to maintain sustainability and ensure food security in the face of these economic pressures.
Although the agroindustry in Argentina, Brazil, and Mexico does not exceed 6% of their GDP, their joint activities account for 76% of the total production in Latin America. These same three countries also account for 70% of exports, Brazil (39%), Argentina (16%) and Mexico (16%).
Latin American Country Trends
The year 2024 was not an easy year for agriculture in Latin America, where the agricultural activities of the countries of the region faced new deficiencies and challenges that will generate changes in agriculture in Latin America soon.
According to the Inter-American Development Bank (IDB) and the United Nations, 74% of the countries in the region are exposed to events that affect food stability, which would be strongly linked to climate change, natural disasters, and price crises. And in terms of agricultural production, Latin America represents 14% of global agricultural production, with Brazil, Argentina and Mexico producing 70% of the region’s food.
In an article in the Spanish newspaper El País, an analysis of América Futura is made and in its context indicates that farmers are the core pieces of the new development, where in this context, the geopolitics of food and climate position Latin America as a key region to meet global security demands, including bioenergy from clean sources such as biomass. This represents a promoter for development and an opportunity to promote a new integration agenda that strengthens competitiveness as a region.
Internally, the promotion of this agricultural model requires the development of more efficient environments in public policies, continuous research, innovation, entrepreneurship and access to capital. This will allow us to move toward eco-intensification, producing more with less use of land, water, fertilizers, pesticides and energy, while reducing greenhouse gas emissions and promoting carbon sequestration, making agriculture a key tool for mitigation.
Bankruptcies in Brazil
In Brazil, the agricultural sector recovered with 2% growth in 2024, driven by increased meat exports and favorable projections for agricultural production, according to projections released by the National Confederation of Agriculture (CNA). The Brazilian agricultural sector is growing again in 2024 after two years of recession due to climate problems. This recovery will reach 5% in 2025. It was also noted that, after the declines suffered by agricultural production of 1.8% in 2022 and 3.7% in 2023, the sector achieved an impressive recovery in 2024 despite having suffered this year the worst drought in the history of Brazil, the main economy in Latin America.
During the first quarter of 2024 and according to Bloomberg Brazil news, it was reported that several Brazilian producers declared bankruptcy, hitting the boom of US$7 billion in agricultural financing loans that narrowed profit margins. Some funds have fallen below the value of their underlying assets after farmers defaulted on loans.
One of the affected companies due to this lack of payments was Agrogalaxy Participações, a distributor of agricultural inputs that lost almost 80% of its value in the last year due to a drop in sales and an increase in default rates and is currently undergoing a strategic restructuring process with the closure of more than 50% of its commercial units and the dismissal of more than 40% of the firm’s employees. This will lead to the company operating with 74 units, according to information presented by Globo Rural.
Another distributor of agricultural inputs retailer that was affected by this situation was Lavoro Agro, a retailer of agricultural supplies that expanded through acquisitions amid an agricultural boom, is seeking investors for a capital injection amid a broader industry crisis that has engulfed farmers, distributors and investors. According to information from Bloomberg, the organization was in talks with other companies and investors to raise funds. This money would help cover the working capital needs of the company, which faces tougher credit conditions due to the sector’s scenario. In February 2025, it announced that there will be no growth this year and that it will close 70 of its stores. The group noted that credit restrictions force it to maintain adjustments to balance its accounts.
McKinsey indicated that in 2023, Brazilian farmers suffered from crop failures, falling commodity prices, and intensifying droughts and floods. But when surveyed in early 2024, they said they expected better results in the next two years, likely influenced by the growing importance of corn exports to China. However, events that occurred after the survey was conducted in the field (mainly forest fires in major sugarcane and soybean-producing regions) may have altered Brazilian farmers’ outlook on profitability soon.
Latin America Agrochemical Market
Regarding the value of the agrochemical market in Latin America, a reduction in value was reflected in 2024 in most countries in the region, fluctuating between 5% and 15% depending on the country and especially due to market volatility. In the last three years, there have been impressive fluctuations with increases in value in 2022, which generated drastic changes in the following years, which were aggravated by the scenarios of area reduction, low prices and high stocks in the chain that led to a critical turning point.
One of the key points, about which there is not much clarity, is the stocks of products and the distribution of inventories. In small countries, there is a distribution network focused on small farms which distributes these inventories throughout the chain, making it very difficult to establish the true impact of stocks in each of them.
Contrary to countries such as Brazil, where the distribution of products moves from the main suppliers to large producers with an accumulation of product that does not allow for adequate monitoring of these stocks on producing farms, which leads to an excess of stock in the agricultural market without considering its real size. By the end of 2024, the movement of products that will contribute to moving inventories in the 2024/2025 harvest crop areas began to be reactivated.
Biologicals Market
In reference to the topic of Mergers and Acquisitions in Latin America, bioinputs have become investment opportunities in the region, since they are a key part of the agroecological transition and can facilitate the access of agricultural products to some demanding international markets. In turn, the promotion and application of bioinputs is directly linked to Sustainable Development Goals, since it allows increasing production and at the same time conserving and adding value to biodiversity, increasing the fertility of agricultural soils without compromising the environment or people’s health. However, in the region there are still various risks and limitations to their use and development.
The question that arises from this reference is why investors and companies are doing business in Latin America. The answer comes in a clearer and more objective way, because there are opportunities to enter new markets, in addition to growth opportunities in specific sectors.
According to the McKinsey & Company’s “The Global Farmer Insights 2024” article published in October 2024, the adoption of biocontrols and bionutrients as sustainability-oriented practices for soil health has been increasing globally. About 31% of farmers use bionutrients, while 20% use biocontrols. The top reasons farmers say they adopt bionutrients is to improve yield, soil quality, and soil health. Farmers adopt biocontrols primarily to achieve lower overall pest management cost per acre and higher efficacy compared to solely applying traditional crop protection protocols.
More and more farmers are adopting biostimulants or biofertilizers compared to biological controls in their fertilizer and crop protection protocols where farmers are increasingly prioritizing productivity. The shift toward operations-focused solutions underscores a broader trend in agriculture, where efficiency and sustainability are becoming paramount.
Farmers in Brazil are leaders in the use of both bionutrients and biocontrols. Farmers’ high use of bionutrients (64%) is based on the historical adoption of inoculants, which has been supported by the government. For example, the Brazilian Agricultural Research Corporation (Embrapa) developed inoculants and new co-inoculation techniques and conducted educational programs to raise awareness among soybean farmers about their efficacy.
In recent years, government support (e.g., the National Bio-input Program and the ABC Plan) and high fertilizer prices have accelerated the adoption of other bionutrients. In the case of biocontrols, the difficulty of controlling specific nematodes and diseases with traditional chemicals drives their adoption by 61% among Brazilian farmers.
About 90% of farmers using organic products said they expect to maintain or increase spending on bio-based products. About 63% will maintain or increase spending on organic products regardless of changes in fertilizer and crop protection prices, suggesting a resilient market. Farmers are not adopting organic products as a substitute for traditional protocols. Interviews with farmers revealed that they use organic products to complement existing fertilizer and crop protection protocols rather than replace them because combined protocols improve yield.
Sustainability is the Future
Latin America will consolidate its position as one of the main net exporters of agricultural products, generating new opportunities for producers to take advantage of their participation in global food supply chains.
Where sustainability will play a fundamental role, driving the adoption of technologies and methods that guarantee the conservation of natural resources.
According to United Nations news, Latin America is expected to grow approximately 2.5% in 2025, although with downside risks. With improved private consumption and export growth, the region is expected to advance more than the previous year, but a greater than expected slowdown in China and the United States, among other factors, could delay it, as stated in the UN Annual Outlook Report. Global growth, meanwhile, is expected to remain at 2.8%. •
Javier Chavarro: Consultant
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