By Nayara Figueiredo

SAO PAULO, Brazil (Reuters) – Brazilians could experience another sharp rise in food prices as the meatpackers struggle with rising costs caused by a severe drought that has affected crops.

The Brazilian meat industry association ABPA claims that there’s no relief before Brazil begins harvesting its mid-year crop of corn.

Ricardo Santin from ABPA stated that companies must continue to share costs.

Companies such as BRF SA, (NYSE:) are seeing a less optimistic outlook on the domestic harvest. JBS SA (OTC) has the potential to have cereal imported, just as in 2021.

Private crop analysts are cutting their forecasts because of the dry, hot weather in Brazil’s southern states. While Conab, Brazil’s state crop agency, has been cautious, trimming its outlook while projecting an increase in soy and corn crops than last year.

According to IBGE, Brazil’s meat prices increased 8.45% by 2021. This was due to global food inflation at 7.94%. The benchmark consumer price index rose 10.06%, making it the largest increase for any calendar year since 2015.

Marcos Zordan from meat processor Aurora stated that buyers are being shocked by the increase of Brazilian corn prices of over 10% since the start of this year. Companies such as Aurora could resort to imports from Argentina and Paraguay if this trend continues, since the La Nina weather patterns have also affected crop forecasts. Zordan noted that while there is no shortage of corn, it will likely be very expensive. Zordan pointed out that domestic corn prices have risen to 94 Brazilian Reals per 60-kg bag in the past two weeks. This was a result of drought conditions in southern Brazil.

Cesar Alves, analyst with Itaú BBA Agribusiness, said meatpackers were initially expected to save on input costs as planting of Brazil’s summer crops fell within the ideal climate window in key states.

According to estimates by government, the initial corn crop is expected to be less than four million tonnes.

Alves stated that “Corn is rising again.” The meat industry will see a tighter schedule at the very least for the first quarter.