June 13, 2011

2011/12 Harvest Plan in Brazil to Emphasize Increased Productivity

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

Brazil's new 2011/12 Harvest Plan is expected to be announced soon, but indications are that the plan will put additional emphasis on increasing the productivity of existing farmland in Brazil and to deemphasize the expansion of agriculture into newly cleared areas. The 2011/12 Harvest Plan will be the first under President Rousseff, but it is not expected to differ radically for the plans approved by President Lula in the past.

The attitude concerning Brazilian agriculture has been shifting significantly in recent years. During past decades, the attitude in Brazil was to clear land as quickly as possible to increase production with little regard to any potential collateral damage that might be inflicted to the environment, rural societies, or rural development. That attitude has now changed and there is now much more of a concern for sustainability and avoiding environmental damage as much as possible.

This new attitude was front and center last year when restrictions were placed on the amount of farmland foreign individuals or government were allowed to purchase in Brazil. It was also very evident during the recent heated debate in the Brazilian Congress concerning new environmental rules know as the Forestry Code. When finalized, these new regulations will force farmers to preserve more of their land in its natural state and to reforest some of the more environmental sensitive areas as well.

The 2011/12 Harvest Plan is also expected to continue increasing financial assistance for small family farmers in Brazil. This was a recurring theme under President Lula and it is expected to be continued under President Rousseff as well. In the 2000 Harvest Plan, R$ 3.3 billion was devoted to small family farmers. In last year's Harvest Plan, that had increased to R$ 16 billion and it is expected to increase once again in 2011/12.

These yearly Harvest Plans put heavy emphasis on low interest production loans for Brazilian farmers and that may be even more required in 2011/12. The prime interest rate in Brazil is currently hovering around 12% and it is expected to increase even further before the end of the year.