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April 16, 2015

Credit now Available for Brazilian Farmers to Purchase Inputs

After complaints from numerous farm organizations, the Brazilian Minister of Agriculture, Katia Abreu, announced earlier this week that a R$ 9 billion line of credit will be made available for farmers to purchase fertilizers and other inputs for the 2015/16 crops. These loans known as "pre-cost loans" are very popular with farmers who want to purchase their inputs early to allow for delivery before planting of the 2015/16 crops starts in August and September.

The Bank of Brazil will issue R$ 7 billion in loans and the Caxia Economica Federal will issue R$ 2 billion. The loans from the Bank of Brazil will be for general agriculture and for all size producers - small, medium and large. The loans from the Caxia Economica Federal will be geared for medium size producers.

The details concerning interest rates and repayment terms are expected to be announced very soon. The interest rates on these type of loans last year was 6.5% and they are expected to increase this year. Even though the interest is subsidized on these loans, they are still expected to increase because all interest rates are increasing in Brazil.

Organizations such as the National Confederation of Agriculture and Livestock (CAN) had complained that delaying these loans would result in higher input costs for farmers. The weaker Brazilian currency is expected to result in higher costs for imported items such as fertilizers and farmers wanted to make their purchases before prices climb even higher. Additionally, freight rates for delivery usually increase the closer it gets to planting time. Traditionally, these loans are made available between the end of February and the middle of March so the program this year is starting at least two months later than last year.