Digital Agriculture and Food Inflation in Brazil: A Critical Assessment

Abstract

This article analyzes the role of digital agriculture in mitigating food inflation in Brazil, highlighting how emerging technologies—such as artificial intelligence, smart sensors, and big data—can increase productive efficiency and sustainability in the agricultural sector. Through an exploratory methodology, the research discusses the challenges and opportunities of digitalization for small- and medium-sized producers, exploring its impact on competitiveness and market accessibility. In addition, it examines the relationship between the adoption of these technologies and the dynamics of agricultural prices, contributing to an essential debate on innovation, food security, and digital inclusion in the rural world. We found that digital agriculture can mitigate food inflation by improving productivity, enhancing supply chain efficiency, and reducing input costs, while underscoring the need for inclusive public policies to ensure equitable adoption among small- and medium-sized producers. The study highlights the need for public policies that foster digital inclusion in agriculture through rural connectivity, targeted training, and access to credit, ensuring that technological advances translate into equitable and sustainable development.

1. Introduction

Brazilian agribusiness is undergoing a transformation driven by the rapid evolution of emerging technologies, which are reshaping the way production sectors operate and interact with the market. The advent of Agriculture 4.0 signaled a new era defined by the widespread integration of digital tools—such as the Internet of Things (IoT), artificial intelligence (AI), cloud computing, and big data analytics [1]—promoting data-centric decision-making and improved connectivity across agricultural systems [2].

The evolution of Brazilian agriculture, which was previously based on rudimentary and low-yield practices in the 1960s–1990s [3], has progressed to digital agriculture, or Agriculture 4.0, where the adoption of digital technologies in agriculture began to accelerate, with tools like sensors, remote sensing, and data analytics initiating significant changes in farming methods [2]. During the period 1975–2021, Brazil’s average annual growth in Total Factor Productivity (TFP) reached 3.31%, exceeding the global average of 1.12% per year [4]. This rate was also higher than those observed in other major agricultural producers, such as the United States (1.48%), Argentina (2.0%), and Australia (1.56%) [4].

Digital agriculture is also aligned with the UN Sustainable Development Goals (SDGs), which aim to balance economic growth, social inclusion, and environmental protection. Digital agriculture facilitates the adoption of sustainable farming methods, including precision agriculture, which enhances resource efficiency and minimizes environmental harm, since this approach enables more effective management of water, fertilizers, and pesticides, contributing to improved soil quality and lower greenhouse gas emissions [5,6,7].

However, the adoption of these technologies faces challenges in Brazil, including high technological costs, inadequate infrastructure, and limited investment in research and development [8]. In light of this, digital transformation needs to be accompanied by public policies that promote digital inclusion and training to ensure that the benefits reach all producers, especially small- and medium-sized ones.

At the same time, Brazil is facing an acceleration in food inflation, particularly since the COVID-19 pandemic. The COVID-19 pandemic intensified food price inflation, driven by supply chain disruptions, heightened consumer demand, and rising production expenses [9,10,11]. Moreover, extreme events, notably the Russia–Ukraine conflict, have exerted additional pressure on food prices by disrupting agricultural value chains and escalating production expenses [11].

For small- and medium-sized producers, this represents an obstacle to the competitiveness and stability of food supply. In this scenario, digital agriculture emerges as a strategic tool to reduce costs, enhance resource management, and mitigate the adverse effects of inflation. Digital technologies such as the Internet of Things (IoT), artificial intelligence (AI), and machine learning have the potential to significantly boost agricultural productivity while lowering operational costs by optimizing input usage and enhancing management efficiency [2,8,12]. In this sense, the integration of sensor data, remote sensing technologies, and other digital tools enables more informed and strategic decision-making in agricultural operations, contributing to greater efficiency and environmental sustainability [2,8,13].

To help understand the relationship between digital agriculture and food price dynamics, this article seeks to critically examine the possible connections between these elements, based on a relevant literature review that highlights both the positive and negative effects of digitalization on Brazilian agriculture, particularly on small- and medium-sized farmers.

Although the adoption of digital agriculture in Brazil remains limited—particularly among small- and medium-sized producers—it is crucial to investigate its potential impact on food price inflation. Prospective analyses of emerging technologies, even at early stages of adoption, are valuable for anticipating broader economic and social effects and for informing public policies aimed at strategically fostering their diffusion. Moreover, adoption patterns in Brazil are markedly uneven, with segments of the export-oriented agribusiness sector already deploying digital tools at scale, particularly in precision farming and supply chain logistics. These localized experiences may already be shaping production patterns and cost structures of key commodities. Given the coexistence of a modern, digitized agribusiness sector alongside more traditional forms of family farming, understanding how technological advancements in one segment affect the broader food system offers important insights into inflationary dynamics and helps inform strategies for inclusive digital integration. Finally, examining the potential of digital agriculture to mitigate inflation supports a normative argument for public policies that promote access to connectivity, training, and financing tailored to underserved farming populations.

To the best of our knowledge, there are no studies that point to a direct and clear relationship between digital agriculture and food inflation in Brazil. By exploring these factors, this study aims to contribute to filling this gap.

This work is organized as follows: Section 2, presents the theoretical and empirical framework that supports the evolution of digital agriculture, as well as food inflation in Brazil; Section 3 discusses this theoretical and empirical review; and, finally, Section 4 presents conclusions.

2. Digital Agriculture and Food Inflation: Where Do We Go from Here?

2.1. Digital Agriculture: Potential and Barriers to Mitigate Food Inflation

The adoption of digital agriculture practices in Brazil has demonstrated great potential to transform the agricultural sector, bringing significant benefits to productivity, sustainability, and food security. Technologies such as artificial intelligence, robotics, nanotechnology, and blockchain are capable of increasing production with higher quality and lower environmental impact, benefiting the entire production chain [14].

In addition, precision agriculture, which utilizes sensors, satellites, and Big Data, has promoted more efficient property management, resulting in decreasing costs and improving decision-making [15]. The growing access to the internet among rural producers, which went from 75,000 in 2006 to more than 1.4 million in 2017 [14,16], has also reduced the gap in the implementation of these technologies.

However, the digitalization of Brazilian agriculture faces considerable challenges. The low level of education among many producers, with approximately 80% having only primary education or no formal education [17], hinders the effective adoption of digital solutions. In addition, family farming, which represents the majority of agricultural establishments, has limited access to advanced technologies, which can exacerbate inequalities in the sector [18]. The adoption of technologies in family farming faces additional obstacles, including the lack of economic protection mechanisms, producer resistance to innovations, a lack of interest from technology providers, high investment costs, and the low educational level of farmers [19]. The discontinuity of several rural extension services, which previously provided information and training, further aggravated this situation, hindering the implementation of digital agriculture [19].

More specifically, in relation to agricultural price dynamics, digital technologies can help stabilize food prices, reduce costs, and increase product traceability, minimizing the impacts of global market crises [20]. However, the implementation of these innovations is not always advantageous for all producers, especially those facing economic and educational barriers. Additionally, resistance from producers and a lack of specialized technical support can hinder the advancement of digitalization in the agricultural sector [21,22].

Therefore, the digitalization of agriculture presents significant opportunities but requires careful management to mitigate its unintended consequences, such as digital exclusion. Investments in digital infrastructure, adequate public policies, and a focus on reducing digital inequalities are essential to maximize the benefits of these technologies, ensuring a more equitable and sustainable transformation in the agricultural sector [23]. In this sense, implementing support mechanisms and strengthening rural extension services are essential to ensure that digitalization broadly benefits all producers, particularly small- and medium-sized rural producers.

2.2. Food Inflation and Food Security: Recent Dynamics in Brazil

Food prices have been rising in international markets, not just in Brazil, particularly after the emergence of the COVID-19 pandemic crisis, followed by the conflict between Russia and Ukraine, and are associated with several recent climate events. Figure 1 shows the recent dynamics of food inflation in Brazil.

In this context, the International Price Parity Policy (IPP) establishes that domestic prices of products in Brazil are aligned with international prices, adjusted to local conditions. Several factors, such as contracts, supply, demand, and the exchange rate, can generate discrepancies between domestic and international prices in the short term. Even products with little international exchange, such as rice and beans, are impacted by the IPP [24,25].

Between 2004 and 2012, domestic prices grew at a slower rate than international prices due to the appreciation of the Brazilian currency, the Real. However, after 2011, with the exchange rate devaluation, domestic prices increased more rapidly. During the pandemic (2020–2022), international prices increased due to imbalances in production chains. In contrast, the agricultural producer price index grew by up to 30% in 2020–2023, driven by domestic demand and the impact of the conflict between Russia and Ukraine [24,25].

Accelerating inflation, particularly in food prices, is a highly sensitive issue, as it directly impacts the population, especially low-income families, since high food prices significantly compromise family budgets, accounting for up to 60% of the minimum wage in some regions [26].

As a result, Brazil is facing an alarming food insecurity crisis, with 60% of its population experiencing some level of food deprivation, particularly in rural areas, where 18.6% of families have severely compromised food security [27]. Figure 2 highlights the evolution of food insecurity levels in Brazil.

3. Discussion

Food price inflation has catalyzed a food insecurity crisis, with a large portion of the population, including in rural areas, suffering from a lack of access to quality food. The adoption of modern digital agriculture practices can mitigate the inflationary process; however, this relationship is long-term, with very limited effects in the short term.

Therefore, to address food insecurity and expand food production, it is essential to boost financial resources and rural insurance policies, in addition to encouraging the adoption of sustainable technologies that increase the resilience of the agricultural sector, especially in the face of climate change [28].

In this sense, it is essential to implement both short- and long-term public policies. The impact of healthy diets on improving family income is more gradual, while the adverse effects of rising prices immediately affect food insecurity [29].

In this context, public programs such as the Food Acquisition Program—Programa de Aquisição de Alimentos (PAA)—play a fundamental role. This type of initiative has played a crucial role in the fight against food insecurity in Brazil, contributing to the income of rural families, especially those with low incomes, and improving school attendance for children in vulnerable situations [30].

Another positive example is the school feeding program, which requires that at least 30% of food come from family farming, strengthening food security and the local economy [29].

Such programs help increase the income of rural families, improve the quality of life, and even promote education by guaranteeing the supply of food to schools and other public institutions. In addition, the requirement that a portion of food come from family farming contributes to the strengthening of small producers and stimulates the local economy.

Another innovative model is the creation of the Agrotechnological Districts (ATD, “DAT” in Portuguese), rural areas created to promote sustainable development and agricultural innovation. DAT aims to promote agricultural innovation and sustainability by integrating advanced technologies and encouraging collaboration among farmers, companies, universities, and the public sector [31].

The transformation of a region with a significant agricultural presence into a DAT depends on analyzing local characteristics, such as education and income, which influence the adoption of technologies. The implementation of digital tools requires factors such as non-prohibitive costs, digital skills of producers, and willingness to innovate. In addition, the support of networks such as cooperatives and academic partnerships, together with a digital connectivity infrastructure, is crucial to ensure the success and sustainable growth of these districts [31].

In this sense, the challenges for social inclusion and sustainability in digital agriculture include the degree of digital accessibility and inequalities in access to new technologies. To ensure that the benefits of digitalization reach everyone, it is necessary to invest in education, infrastructure in rural areas, and public policies that combat these inequalities. Additionally, it is essential to ensure that technological advances do not harm natural resources, thereby promoting sustainable agriculture.

The digital transformation of Brazilian agriculture relies on overcoming obstacles such as resistance to innovation and socioeconomic inequality, with public programs and initiatives, such as the DAT project, being essential for inclusion and sustainability in the sector. If family farming fails to keep pace with the evolution of digital agriculture, it risks falling even further behind those producers who adopt these technologies. Information asymmetry can lead to increased socioeconomic marginalization of certain producers, thereby exacerbating inequality in rural areas.

In light of this, digital agriculture has the potential to contribute to the mitigation of food inflation through three interrelated mechanisms. First, technological innovations—such as smart sensors, climate monitoring systems, big data analytics, and AI-driven applications—can enhance on-farm productivity and reduce production costs. These tools enable more efficient use of agricultural inputs (e.g., water, fertilizers, pesticides), minimize field-level losses, and improve risk management, particularly in large-scale crop systems, thereby decreasing the cost per unit of output. Second, digital technologies improve supply predictability by facilitating real-time monitoring and more accurate production planning. This can help prevent supply shocks, which are a frequent driver of short-term food price volatility in Brazil, especially for climate-sensitive and perishable commodities. Third, digital agriculture can generate indirect benefits for consumers by enhancing efficiency across the agri-food supply chain. While initial cost reductions primarily benefit producers, competitive and regulated market conditions may allow some of these savings to be passed on to consumers. Additionally, advancements in post-harvest handling and logistics, supported by digital tools, can further lower supply chain costs, thereby alleviating inflationary pressures.

It is important to acknowledge that the relationship between digital agriculture and food inflation is neither automatic nor linear. Food price dynamics are influenced not only by supply-side factors—such as climatic variability and agricultural productivity—but also by broader macroeconomic variables, including exchange rate movements, fuel costs, and export determinants. While digital agriculture primarily addresses supply-side inefficiencies, its broader macroeconomic effects are contingent upon the extent of its adoption and the presence of public policies that promote equitable and widespread access to these technologies.

4. Conclusions

The adoption of digital technologies in agriculture can transform the agricultural sector by increasing efficiency, reducing costs, and promoting sustainability. However, small- and medium-sized producers face challenges such as high costs, lack of infrastructure, and the need for training.

Technological advances in agriculture may help reduce inflationary pressures by boosting production efficiency, lowering operational and logistical costs, and making supply flows more stable. Yet, these benefits are not automatic; they require inclusive digital infrastructure and policy support to reach their full potential, particularly in unequal agricultural contexts like Brazil.

To overcome these barriers, collaboration between research institutions, universities, government agencies, and private associations is crucial, ensuring technical support, training, and financing.

A significant obstacle is full access for small- and medium-sized producers to new technologies, as well as their digital literacy. Therefore, policies should prioritize the digital inclusion of small- and medium-sized producers, focusing on training, specific lines of rural credit, and digital infrastructure in rural areas. Expanding connectivity and creating DAT can accelerate the adoption of advanced technologies, promoting sustainability and innovation.

It is also essential to overcome producers’ resistance to innovation and inequality in access to technologies, prioritizing continuous training, especially for those in family farming. Furthermore, public policies that integrate technological innovation with social and environmental justice are necessary to ensure an equitable and sustainable transformation in agriculture.

Future research could benefit from the use of foresight methodologies, such as the Delphi method or scenario analysis, to systematically explore the potential trajectories of digital agriculture in Brazil and its broader impacts on food systems. These approaches would allow for a more structured assessment of uncertainties, stakeholder perspectives, and long-term implications, especially in contexts marked by rapid technological change and institutional asymmetries. Given the exploratory nature of this study, such methodological deepening represents a promising next step for advancing the research agenda on the relationship between digital innovation, agricultural policy, and food security.