Officials project scenarios for extending investment installments, creating new lines of financing, and measures to support commercialization

01/25/2024

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Carlos Fávaro — Foto: Edilson Rodrigues/Agência Senado

The combination of a predicted shortfall in Brazil’s grain harvest and continued low international commodity prices has created a scenario that is as rare and complex as it is potentially damaging to rural producers and challenging for agricultural policy in 2024, according to Agriculture Minister Carlos Fávaro.

The focus of the ministry will be to anticipate the “imminent crisis” and announce measures to help farmers before the end of the soybean harvest, the minister told Valor. The intention is to avoid an environment of debt and damage before taking action. He also believes that the second corn harvest will be smaller than originally predicted.

Mr. Fávaro informed President Lula of the situation in a phone call on Tuesday and will meet with Finance Minister Fernando Haddad next week to discuss measures to minimize the financial impact on farmers.

Faced with budgetary constraints and still incipient data on losses in the soybean harvest that has just begun across the country, government officials are doing the math and only projecting scenarios for possible extensions of investment installments, the creation of new lines of financing, and the implementation of measures to support marketing.

Mr. Fávaro acknowledged that “the profitability of this harvest is already gone, even for the highly productive ones”—due to the still high production costs and the impact of the climate on the average yield—and that 2024 will be an atypical year. “We will work with what we have and minimize the impact so that we can grow again in the 2024/25 harvest,” he said. “Now we have to do everything we can to move forward with as little impact as possible,” he added.

“Many producers will harvest less and some much less than last year. The drop in production with low prices sends up a red flag, so we have to act very quickly. It’s a rare scenario, but when it happens it becomes very serious,” said Mr. Fávaro.

The minister emphasized that one of the proposals on the table is to extend the investment installments, which could generate costs for the National Treasury. Internal analyses are being carried out to determine how many and which contracts may need to be extended, given that production in some regions of the country will be less affected, as well as the interest rates on these loans. For example, the technical team is evaluating the volume of operations contracted since the 2016/17 harvest in the Moderfrota, Pronamp Investimento and Inovagro lines, which mature in 2024.

“With the prospect of a decrease in the Selic policy rate, if the rate is closer to the interest charged on these operations in previous years, the subsidy will be small. We can try to find a space here,” said Mr. Fávaro. He noted that the budget is limited and that he will not do anything that could jeopardize the government’s fiscal targets.

The minister said the measures should not be delayed to avoid side effects in the agribusiness sector, such as defaults, producers being denied credit, lack of access to new credit, and an increase in debt. Some measures should be announced before March, he said.

The Ministry of Agriculture is also working with the Brazilian Development Bank (BNDES) to create a line of credit in dollars with an extended term for working capital, which could help retailers and other companies give a boost to rural producers who finance their activities with private loans. Mr. Fávaro said there could be other measures, but did not provide details.

*Por Rafael Walendorff — Brasília

Source: Valor International

https://valorinternational.globo.com/