Extreme weather wiped R$126bn from Rio Grande do Sul farms

The agricultural sector in the state faced another year of losses in 2025. Farsul estimates a shortfall of 8 million tonnes from an expected harvest of 39 million tonnes of rice, corn, soybeans, and wheat. Only slightly more than 31 million tonnes were harvested. As a result, the sector’s Gross Production Value is expected to come in nearly R$20 billion below forecast this year. Farsul projects a 10.66% contraction in Rio Grande do Sul’s agricultural GDP for 2025.

“We’re facing an extremely challenging outlook, especially given the direction of Brazil’s economy,” said Farsul President Gedeão Pereira during a press conference.

He stressed the need for investments in irrigation and soil management to reduce the impact of droughts, but noted that farmers’ financial difficulties will likely delay these improvements. “These measures aren’t cheap, and in the crisis we’re facing in the state, implementing them will take even longer,” he said.

Following consecutive years of droughts and floods, farmers’ repayment capacity has deteriorated, leading to a sharp rise in defaults. The state’s rural loan default rate rose from 0.79% in August 2024 to 3.28% in August 2025. The total amount in default jumped from R$699 million to R$3 billion over 12 months, a 331% increase.

This deterioration in credit quality has forced financial institutions to reassess their risk exposure. Banks are now demanding more collateral, reducing exposure, and making it harder for farmers—especially tenants without real guarantees—to obtain financing, Farsul said.

“There was a 21% drop in the number of rural credit borrowers in Rio Grande do Sul for the 2025/26 planting season. And we have an 11.4% default rate on rural credit due to high interest rates,” said Antônio da Luz, Farsul’s chief economist.

Credit performance in the state confirms this tightening. According to Central Bank data analyzed by Farsul, rural production loans fell 10% over 12 months and 23% between July and November. The number of contracts dropped 13% and 20% in the same periods, respectively.

Investment credit declined even more sharply. Over 12 months, the total amount borrowed dropped 23%, and by 41% between July and November. The number of investment contracts fell by 27% and 40%, respectively.

Debt renegotiation

In this context, Farsul called for changes to provisional presidential decree (MP) 1314/2025, which addresses the renegotiation of rural debts. The measure offers financial relief for farmers and cooperatives affected by crop losses between 2020 and 2024 and authorizes up to R$12 billion in credit for debt renegotiation.

The federation is asking for several adjustments to ensure broader access to the program, including the inclusion of 2025 crop-year loans, a revised cutoff date for default status, the inclusion of previously renegotiated loans aimed at maintaining good standing, prioritization of market-rate credit operations, and an increase in available funds.

Farsul is also advocating for the approval of Bill 5122/2023, currently under review in Brazil’s Congress. The bill addresses the securitization and renegotiation of rural debts and would authorize the use of the Social Fund (financed by pre-salt oil revenues) to create an emergency credit line for farmers affected by natural disasters.