Insight Focus
Brazil faces rising food inflation from fertiliser costs. Higher input prices, driven by the Iran conflict and supply disruptions, are increasing production costs and feeding through to food prices and household budgets. As pressures extend across packaging and supply chains, consumption is weakening, with consumers buying less and switching to cheaper alternatives.
Fertiliser Costs Lift Food Prices
Three months after the start of the war in Iran and the closure of the Strait of Hormuz (through which a fifth of the world’s oil and 20% of its exported fertilisers are transported) attention is increasingly focused on the impact of the conflict on food inflation and consumption.
The price of agricultural nutrients has increased by more than 22% at the port of Santos since the beginning of the conflict in late February, impacting production costs in the field. Urea, widely used in crops such as corn, fruit and vegetables, recorded the largest increase, exceeding 40%, according to Comex. Between January and April, fertiliser prices rose by 33%.
Source: Comex
The impact on food inflation has been visible. The preliminary price index for May indicates that food consumed at home rose 1.73% compared to April. The increase was driven by items such as potatoes, which rose by 26.3%. Potatoes depend on the intensive use of urea. Excessive rainfall in producing regions of Minas Gerais and Paraná also contributed to the price hike.
Other foods, such as onions, tomatoes, and milk, also underwent price adjustments, according to the Brazilian Institute of Geography and Statistics (IBGE).
Source: IBGE
Products from the so-called basic food basket—a set of foods and beverages considered essential for consumption—rose by about 4% in May.
Household Budgets Come Under Pressure
“The weight of these adjustments on the budgets of low-income families, who are the majority in Brazil, is significant and may even impact consumption,” says André Braz, an economist at the Getúlio Vargas Foundation (FGV).
More than 60% of the Brazilian active population earns up to two minimum wages per month, equivalent to BRL 3,242 (USD 641.7), according to IBGE. Families with a standard income of about BRL 3,613 (USD 717.7) per month typically spend an average of BRL 790 on supermarket purchases and BRL 1,300 on basic bills, such as electricity, internet, and gas, according to NielsenIQ. The remainder is directed toward paying debts and expenses such as rent, leaving little room for manoeuvre in the budget.
Source: IBGE
The high interest rate in Brazil, at 14.5% per year, is already impacting debt and loan payments. The increase in inflation, currently at almost 5% per year, also does not help.
If the war in the Middle East does not end in the short term, further price increases are expected in the coming months. For now, there are still some stocks of products such as fertilisers and plastic resins, used to manufacture everything from plastic bags to food packaging and medicine blister packs.
Consumption Weakens as Costs Spread
In the fields, costs continue to rise, with a general increase in the price of fertilisers and pesticides. As a result, the impact on consumption has come into focus.
A NielsenIQ survey recently released shows that between January and March of this year there was a decline in 70% of product categories found in supermarkets compared to the same period in 2025. Prices have increased and shopping carts have shrunk: the volume of items purchased fell by 1.9% in the first quarter, according to the survey.
The data is not surprising, although it is worrying for retailers and the agricultural industry. In recent years, products such as long-life milk and dairy products, which have been undergoing price adjustments due to declines in production and increased costs, have recorded a reduction in consumption. Between 2014 and 2025, dairy sales fell by 8.3% in Brazil, according to Euromonitor.
Source: Euromonitor
Brazilians are also buying less red meat. This year, consumption is expected to reach 7.6 million tonnes, up from 7.5 million tonnes in 2025 but still 6% lower than in 2024. Consumers are switching to cheaper poultry and eggs instead of beef.
Source: ABPA.
This behaviour is expected to intensify if prices continue to rise. “Now, there is an additional inflationary pressure factor, which is the supply shock of oil and its derivatives, as well as other products, caused by the war in Iran,” says Braz.
Continuous increases in the price of polyethylene have been impacting inflation more broadly. The material is used to manufacture a range of products, from packaging to plastic bags and pipes for sewage systems and is a petroleum byproduct.
Packaging represents about 15% of the food sector’s cost, according to the Brazilian Association of the Food Industry (ABIA). “This amplifies the transmission of cost increases along the production chain,” the entity says in a statement.
There are already reports of increases of up to 40% in packaging prices. Plastic processors have been absorbing part of the increased costs of essential raw materials, such as polyethylene and polypropylene, which have been readjusted by 70% since the beginning of the war in Iran, according to the consulting firm ICIS.
Even if the food industry does not pass on the full increase in packaging prices, the impact on final costs should be significant. After all, any difference in a sector highly sensitive to price adjustments is usually relevant.
The end of hostilities in the Middle East should pave the way for a gradual reduction in price pressures, especially in supply chains most dependent on oil and its derivatives. Even so, even in the most optimistic projections, a return to less inflated price levels should take at least a few months.
