Brazil’s soybean and corn farmers tap 21% more credit this planting season

Agricultural loans in Brazil reached 64.6bn reais ($19.4bn) since the start of the 2017-2018 crop year in July through November, up from last year’s 53.5bn reais as weaker soybean and corn prices push commercial farmers out of less favorable barter deals and into subsidized government credit.

Financing for crop maintenance, sales, freight and storage accounted for 52.3bn reais of total farm loans over the period, up 18% from last year.

Spending on equipment and farm machinery accounted for the remaining 12.3bn reais, up 34%, the ministry said.

“The value of loans contracted are up 20.6% from this time last crop,” Farm Policy Secretary Neri Geller said of the Agriculture Ministry’s regular analysis of central bank data.

Virtually all farm loans originate from Brazil’s BNDES development bank at subsidized rates but are distributed and managed by banks. The lion’s share of farm credit is disbursed and managed by state-run bank Banco do Brasil.

Geller said the main takeaway from the numbers was that “loans for maintenance and sale of crops grew 36%, mostly because the price of some products are lower than those last year.”

The secretary was referring to the deterioration in barter rates for soybeans and corn, which make up 90% of Brazil’s grain output annually. There are no official numbers for farm barter deals in Brazil.

Although the numbers are less transparent than bank loans, barter deals between soy and corn producers and input and equipment suppliers had been on the rise in past years because of tighter credit conditions during the financial and political crisis over the past years.

As prices for these commodities fall and the price of fertilizer and farm machinery rise with the weakening of the real against the dollar, the number of bags of soybeans or corn that farmers need to put up to buy the same ton of nutrient or same tractor goes up.

Brazil’s summer soybean and corn crops have almost completed their planting season and are expected to produce bumper crops but not as big as the record numbers posted last season with the help of near perfect weather, crop supply agency Conab said in its third monthly estimate of the grain crop released earlier today.

Credit for soybean production rose to 24.87bn reais over the first five months of the crop year in 2017-18 from 21.92bn reais over the same period last season, Conab said