350 farmers will have access to access to rural credit, technologies and input purchasing pool
09/08/2022
A year and a half after agreeing to buy Biosev from Louis Dreyfus Company (LDC), Raízen is starting to integrate the company’s sugarcane suppliers into its relationship dynamics with farmers. In total, 350 farmers will have access to the company’s initiatives such as access to rural credit, technologies and an input purchasing pool.
With the addition of these producers to its base, Raízen will have around 2,000 sugarcane suppliers, which represent half of the volume of raw material processed. In the 2022/23 season, they are expected to harvest around 40 million tonnes, half of the almost 80 million tonnes the company is expected to crush in this cycle, as Raízen itself indicated in its last earnings report.
The integration of suppliers is the last step in the union of Biosev’s business with Raízen. The transaction, closed for R$3.6 billion and exchange of shares with Biosev’s former shareholders, increased Raízen’s crushing capacity by 30 million tonnes per cycle, making it account for one-fifth of the sugarcane processed in the South-Central region.
Offering relationship programs to these and its other sugarcane suppliers is a crucial part of Raízen’s strategy to ensure the supply of raw material at a time when the sugar-and-ethanol industry faces a shortage of sugarcane.
Amid low productivity, the mills face increasing competition. There is also fierce competition with the advance in soybean cultivation, which has reduced sugarcane fields.
One strategy has been to include the new suppliers in a pool of input purchases led by Raízen in its Cultivar program, which results in cost reductions by increasing the scale of purchases.
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Ricardo Berni — Foto: Divulgação
The company expects Biosev’s former producers to start joining the pool in the next crop, said Ricardo Berni, Raízen’s agribusiness director. In the last season, the organization of the pool allowed the company and 282 producers to circumvent cost inflation aggravated by the war in Ukraine at the end of the season, resulting in a savings of R$71 million, compared to R$295 million committed with inputs.
In general, the savings are around 7% to 10% in relation to market prices. In three harvests, Raízen and 200 suppliers – mostly large ones – saved R$120 million.
“More than the savings, farmers now have access to information, better logistics, and predictability,” Mr. Berni said. As many suppliers also produce other crops, the partnership can help them with other activities.
The former suppliers of Biosev’s plants will also be able to access rural credit Raízen intermediates with Santander. Last season, the company facilitated the granting of R$120 million in credit from the bank to its suppliers.
Between 20% and 25% of the producers that integrate the Cultivar program tap the line of credit. Through the program, Raízen speeds up the concession of credit to farmers, reducing the red tape normally faced by individual farmers.
The company does not reveal estimates of the pace of integration of Biosev producers to its input purchase and agricultural credit programs, but expects “good adhesion,” assures Mr. Berni. The challenge is to access regions where Raízen was not present before, such as Ribeirão Preto (São Paulo), Minas Gerais and the Biosev cluster in Mato Grosso do Sul.
Some suppliers coming from Biosev are already accessing technologies that Raízen fosters in its startup hub, Pulse, in Piracicaba (São Paulo). The company has been promoting 24 tools developed there with producers from the Cultivar program. “With the scale we have acquired, we can transfer much more technology,” said Mr. Berni.
According to him, the “triad” of solutions offered – formed by the Cultivar program tools, the Elos program, more focused on sustainability, and Pulse – intends to “raise the level of profitability and productivity” of producers, who continue to be harassed by competition in the segment and by the expansion of soybean plantations.
Raízen also indicated that it expects to consolidate until the end of this harvest a program that will reward suppliers that improve their environmental and social practices. The plan is to offer better conditions to producers with “excellence in sustainability,” such as priority access to the purchasing pool, discounts on products and more attractive rates.
*By Camila Souza Ramos — São Paulo
Source: Valor International