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February 24, 2020

Brazilian Government Releases "Pre-Cost" Funding

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

Part of Brazil's farm program includes loans to farmers to pre-purchase inputs for their subsequent crops. These funds are generally made available as farmers are harvesting their previous crops in order to give them more flexibility to transport and store their crops in the hope of higher prices once harvest pressures ease.

This program is called "pre-cost" funding and the Brazilian Minister of Agriculture, Tereza Cristina, announced last week that the Brazilian government had released R$ 15 billion reals to the Bank of Brazil for their 2020/21 "pre-cost" program. The loans will carry a very attractive interest rate of 6%. This represents an increase of 47% compared to last year when program made available R$ 10 billion reals.

The funds will be made available for producers to store and transport their current crop and to purchase the inputs needed for their 2020/21 crops of soybeans, corn, cotton, coffee, rice, and sugarcane.

The Minister also announced that there will be at least R$ 1 billion reals available in the 2020/21 Harvest Plan to subsidize crop insurance, which would be the most ever for the program.