The spillover of Brazilian agricultural producer prices to low-income consumer inflation and food security in Brazil

Purpose Considering that food insecurity affects a significant portion of Brazil's low-income population, who respond to rising prices by making substitutions that compromise dietary quality and quantity, this study quantifies how inflation fluctuations for the lowest-income households are associated with variations in agricultural producer price indices for grains, fruits/vegetables and animal products from January 2008 to March 2024. Design/methodology/approach We develop a model inspired by the New Keynesian Phillips Curve, augmented with a custom-built variable that captures rainfall-induced climate fluctuations. Estimation uses time-varying parameter vector autoregressive models. Findings Key results indicate that, on average, 15.25% of inflation fluctuations for low-income households are linked to shocks transmitted through agricultural producer prices. This underscores the critical role of upstream agricultural price dynamics in shaping cost-of-living challenges for vulnerable populations. Research limitations/implications One limitation of the study is the proxy used for rainfall incidence. For future studies, it is essential to explore alternative methods for constructing such a series. Originality/value The research advances the inflation literature, as prior Brazilian studies have focused narrowly on single food items or specific groups, using consumer prices as a reference.