February 1, 2016

Brazil Announces Credit for Early Purchases of Inputs for 2016/17

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

One of the big complaints Brazilian farmers had last year was the delay in making credit available for the early purchase of inputs such as seed, chemicals, and fertilizers. The delay in making the credit available was caused by the federal government's need to slash budgets in early 2015 in response to the worst downturn in the Brazilian economy in decades. The delayed release of the credit increased the cost of production for Brazilian farmers because they were forced to delay the purchase of the inputs for the 2015/16 growing season. While they were waiting for their loans, the Brazilian currency was devaluating resulting in higher costs for imported items such as chemicals and fertilizers.

The government heard their complaints and this year they have tried to address the issue. The Brazilian government, in conjunction with the Bank of Brazil, recently announced that R$ 10 billion in credit would be made available for Brazilian farmers as soon as this month (February). This is in sharp contrast to last year when the credit wasn't available until about June.

The credit is part of the Pre-Cost program which is included in the National Program to Help Medium Size Rural Producers (Pronamp). All of the loans will have subsidized interest rates. For loans up to R$ 710,000, the interest rate will be 7.75% and for loans up to R$ 1,200,000, the interest rate will be 8.75%. These subsidized interest rates are real bargains for Brazilian farmers because if they went to a commercial bank for a loan, the interest rates would probably be over 20%. These loans will be used for the inputs for soybeans, corn, rice, and coffee.

Subsidized interest rates for production loans is the main type of farm program provided by the Brazilian government. The programs are more generous for small and medium size producers and less generous for larger producers and they are renewed on a yearly basis. Details of the 2016/17 "Harvest Plan" as it is called in Brazil, will be released probably in May.