Ministry of Agriculture is considering line with the Brazilian Development Bank to help industry renegotiate debts of producers affected by crop failure

01/12/2024

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Carlos Augustin — Foto: Guilherme Martimon/MAPA AGRO

The forecast of a drop in grain production in the 2023/24 season and the fall in profitability in the countryside, with the maintenance of high costs and lower prices for agricultural commodities, led the Ministry of Agriculture to bring together entities from the sector in Brasilia on Thursday to discuss possible measures to support farmers and input industries in a projected scenario of indebtedness and lower liquidity in the coming months.

With budget restrictions, the initial idea is to create alternatives to solve possible private debts at no cost to the federal government. The proposal is to structure a line of credit in dollars with the Brazilian Development Bank (BNDES) for costs and working capital, with a three-year payment period.

The measure would help trading companies and input resellers to raise funds and renegotiate producers’ debts in regions such as Mato Grosso state and Matopiba (the confluence of the states of Maranhão, Tocantins, Piauí and Bahia), where the Crop Plan’s controlled credit represents a small portion of the productive sector’s financing.

A similar credit line was made available in 2023 so that cooperatives in Rio Grande do Sul could give their farmer members a boost, but it hasn’t taken off. Only R$20 million have been accessed so far.

At the meeting, representatives of organizations such as the Brazilian Association of Soybean Growers (Aprosoja), the Agricultural Federation of Rio Grande do Sul (Farsul) and the Brazilian Rural Society (SRB) told Neri Geller, the Secretary for Agricultural Policy, and Carlos Augustin, a special advisor to the Ministry of Agriculture, that the scenario was worse than that projected by the National Supply Company (Conab), which predicts a harvest of 155.3 million tonnes of soybeans this year. The reports indicated a drop of up to 20 million tonnes compared to the government’s projection due to delays in planting, replanting, drought, and excessive heat.

The sector has told the ministry that it may need to extend its debts, at a cost to the National Treasury. The measure is on the radar, especially for investment installments due in 2024. The ministry’s representatives, however, stressed the difficulty of obtaining fundas for this type of action.

The consultancy Pátria Agronegócios presented a survey, made at the request of Aprosoja, with a production projection of 143.18 million tonnes, a reduction of 7.4% in relation to the volume of the 2022/23 season.

The area planted with soybeans in the country, according to Pátria, stood at 44.4 million hectares. Average national productivity is expected to fall by 8.1%, to 3,200 tonnes per hectare. In Mato Grosso, the country’s main producer, production is expected to fall by 17% compared to the 2022/23 harvest, to 37.8 million tonnes. In Paraná, the loss could be 11.6%, to 19.8 million tonnes of soybeans.

In relation to Pátria’s initial estimate, which projected a production potential of 164.67 million tonnes in the 2023/24 harvest, 21.5 million tonnes of soybeans will be lost. “It’s the second biggest crop failure in history on this basis of comparison,” said Matheus Pereira, managing partner of the company.

Cleiton Gauer, superintendent of the Mato Grosso Institute of Agricultural Economy (IMEA), showed that the maintenance of high production costs in Mato Grosso and the reduction in soybean prices jeopardize the profitability of the state’s producers, even if the crop failure is not confirmed.

According to IMEA calculations, farmers need to harvest 65 bags per hectare, well above the historical average, just to cover the total costs of the crops, estimated at R$7,200 per hectare. In order to cover the general costs of the harvest, without taking into account investment and leasing costs, for example, productivity above 50 bags is needed.

For corn, the scenario is even worse, with total costs estimated at 161 bags per hectare. Mr. Gauer said that the figures could change over the course of the harvest. “The problem lies in the high costs and the projection of soybean prices below R$100 for future sales. The drought will only worsen a problem that already existed,” said Carlos Ernesto Augustin, special advisor to the Ministry of Agriculture.

“The figures weren’t adding up before. There’s turbulence ahead,” said Sérgio Bortolozzo, resident of the Brazilian Rural Society (SRB).

Source: Valor International

https://valorinternational.globo.com/