In the Central West, insured soybean acreage rose by 500,000 hectares
11/22/2024
The rising frequency of extreme weather events in Brazil and the increasing difficulty of predicting adverse conditions and their impacts on agriculture have driven greater demand for rural insurance, particularly in regions that have historically avoided such protections.
The insured soybean area—the primary product covered under the Rural Insurance Premium Subsidy Program (PSR)—has already surpassed 2023 levels. According to Glaucio Toyama, president of the Rural Insurance Commission of the National Federation of General Insurance (FenSeg), 3.8 million hectares of soybeans have been insured for the 2024/25 harvest, up from 3.1 million hectares in the previous cycle.
Soybean producers in Mato Grosso, Mato Grosso do Sul, Goiás, and the Federal District have insured 1.6 million hectares this season, compared to 1.1 million hectares in 2023/24.
Among them is Dieicson Siqueira Serpa, who planted 1,500 hectares of soybeans across Goiatuba, Morrinhos, and Panamá in the southwest of Goiás. After the soy harvest, the land will be used for corn and sorghum. Part of these crops are insured. “Insurance is a way of staying in the market. With the climate, relying solely on personal or financed resources without protection is too risky. Everything is at risk: rain, drought, hail,” he said.
Mr. Serpa noted occasional losses and claims, particularly for the second sorghum crop, but cited the cost of insurance as a significant barrier to broader adoption. “When producers have their own resources, they often skip insurance because it’s too expensive and makes the business unviable,” he explained.
Brasilseg, a leader in Brazil’s rural insurance segment, reported notable growth in forest and livestock insurance policies between January and August 2023. Forest insurance saw a 719% increase, with the insured area expanding from 52,000 to over 426,000 hectares. Livestock insurance rose 134%, covering 10,000 hectares of pasture compared to 4,000 the previous year.
Despite this increase in coverage, insurers have faced a challenging year. Rural insurance revenue fell by 3.2% to R$9.6 billion by August, according to Superintendence of Private Insurance (Susep) data compiled by the National Insurance Confederation (CNseg). These figures also include life insurance and rural pledges.
In September, CNseg revised its growth forecast for the rural insurance market, cutting expectations from 7.9% to just 1%. By year-end, the projection had been further reduced to 23.1%, primarily due to delays in disbursing PSR subsidies.
Another contributing factor is the decline in the average rural insurance premium, which fell from 7.47% to 6.86%. This decrease reflects the growing uptake of policies outside Rio Grande do Sul and Paraná—historically the main consumers of rural insurance—resulting in a more diversified distribution of risk. FenSeg’s data, however, focuses exclusively on crop insurance.
The results remain below industry expectations. According to Mr. Toyama, the market had anticipated greater expansion due to increased interest from farmers.
The exhaustion of the PSR budget, albeit later than usual, has tempered hopes for a stronger recovery in the rural insurance market. Following budget cuts and freezes, nearly R$890 million was invested in 2023—the lowest level since 2020—excluding the R$210.8 million earmarked for policyholders in Rio Grande do Sul, set to be released soon.
In late October, the FenSeg commission sent a letter to the Ministries of Agriculture, Finance, Planning, and Budget, urging the release of R$52.9 million from the PSR budget and requesting an additional R$197.8 million to cover the backlog of unsubsidized policies and projected demand through the end of the year.
However, the chances of this request being granted are slim amid ongoing government discussions on spending cuts. The Secretary for Agricultural Policy at the Ministry of Agriculture, Guilherme Campos, highlighted the challenges of securing additional funds in the current fiscal environment. “The resources are too limited. They help, but they don’t solve the issue. With the government’s financial constraints, it’s all about cutting back,” said Mr. Campos, noting that the blocked R$52.8 million is expected to be restored to the Ministry’s budget by December.
Insurers are increasingly concerned about the outlook for the next winter crop in 2025, which carries the highest climatic risks. While demand for rural insurance policies is accelerating, uncertainty about the 2024 budget looms large.
Although the 2025 budget proposal allocates R$1.06 billion to the PSR, the sharp rise in the Agricultural Activity Guarantee Program (PROAGRO, a 50-year-old agricultural insurance program designed to protect farmers against uncontrollable natural losses) rates could drive producers toward rural insurance, intensifying competition for these funds. Mr. Toyama of FenSeg warned that resource shortages are likely, especially during the winter harvest.
“This impacts everything. If a clear plan isn’t in place, producers face tough choices: go without insurance and compromise their margins, take Proagro coverage at rates of 20% to 30%, or buy insurance at 10% to 15% without subsidies. In the absence of subsidies, they may lower their technological investment in crops, ultimately affecting productivity,” he explained.
“We are working to make the government aware of the need to raise the allocation to at least R$2 billion, but we’ve yet to receive a positive response,” said Esteves Colnago, CNseg’s director of institutional affairs.
The broader issue, as noted by Mr. James Hodge, director of agribusiness and construction at WTW, is the low uptake of rural insurance in Brazil. “Even with rising participation, the country remains at the same levels seen a decade ago, far from the 2021 peak. Only 10% to 15% of producers are insured,” he pointed out.
This year, sporadic spikes in interest were observed following fires in August and September, “particularly for citrus crops and drought-related risks,” Mr. Hodge added. However, with the anticipated arrival of La Niña and increased rainfall, demand has since returned to typical levels.
*By Rafael Walendorff, Rita Azevedo, Globo Rural — Brasília and São Paulo
Source: Valor International