Brazilian farmers tap 12.4% more government credit

Farmers in Brazil contracted 92 billion reais ($28 billion) in subsidized government financing since July 2017, the start of the current 2017/18 crop year, an increase of 12.4% from this time a year ago, the Agriculture Ministry said in a report on the farm credit markets.

This represents 49% of the 188.4-billion real ($57 billion) Farm Bill this season allocated to commercial agriculture and ranching by the government. At this time last year, producers had contracted 44.6% of the government credit available to them.

The increase highlights the less attractive barter market this season, that has pushed farmers away from swapping their beans or corn for inputs such as fertilizers and agrichemicals.

Credit for planting, upkeep and harvesting of commercial farmers’ crops accounted for 52.3 billion reais ($15.9 billion) of the credit tapped, an increase of 3.4% from a year ago.

Subsidized loans for investments in machinery, expansion, silos and other capital goods grew by 25.3% to 18.7 billion reais ($5.7 billion), underscoring the recovery in investor confidence in the agricultural sector, the ministry said.

Brazil’s yearly output of soybeans and corn accounts for roughly 90% of the country’s total grain production by tonnage, and most of the credit will go to commercial farmers of these crops.

Grain producers harvested a record 232 million mt crop last year and are on track to harvest a slightly smaller but still bumper crop of 220 million mt this 2017/18 season.

The funds are made available at an annual rate of 7.5% to 8.5%, which is below private sector rates, and have terms of 14 months.

Brazil’s paper market for soybeans and corn continues to grow, marking the diversification of farmers’ credit options.

The emission of so-called Agricultural Letters of Credit (LCA in Portuguese), which are backed by farmers’ crops and guaranteed by state-run banks expanded to 14.4 billion reais ($4.4 billion) from 10 billion reais a year ago, the ministry said.