June 18, 2020

Brazil's Harvest Plan-5.8% More Money, 1-2% Lower Interest Rates

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

The Brazilian government announced yesterday the details of their 2020 Agricultural and Livestock Plan, which is commonly known as the Harvest Plan 2020/21. According to the Brazilian Minister of Agriculture, Tereza Cristina, the Harvest Plan 2020/21 calls for R$ 235.6 billion reals in resources to be made available for Brazilian farmers in the form of low interest subsidized loans, which is an increase of 5.8% compared to last year.

Brazil's Harvest Plan is their equivalent of the 5-year Farm Program in the United States, but on an annual basis. The plan will take effect on July 1, 2020 and extend through June 30, 2021.

The Minister stated that the goal of the Harvest Plan 2020/21 was to make more resources available at lower interest rates especially for small and medium size producers. Interest rates on the various loans are expected to decline 1% to 2% compared to last year.

Harvest Plan 2020/21 will make available R$ 179.3 billion for production and marketing loans and R$ 56.2 billion for investment loans. The government's subsidies for crop insurance will increase 30% to R$ 1.3 billion compared to R$ 1.0 billion in 2019/20.

Medium size producers will receive the largest percentage increase in resources in the 2020/21 program compared to last year. The program for production and marketing loans for medium size producers will total R$ 32.9 billion, which is an increase of 24.2% compared to last year. The program for small family farmers will increase 5.7% to R$ 33 billion. For the rest of Brazilian producers and cooperatives, the government will make available R$ 169.7 billion, or 2.9% more than last year.

The one program that will have reduced funding compared to last year is the Moderfrota program, which is the principal governmental program for the financing of machinery purchases. The amount of resources will decline to R$ 6.5 billion, which is 14.4% lower than last year's 7.5 billion. To compensate for the reduction, the Bank of Brazil will make available R$ 2.5 billion for equipment purchases with similar requirements to the Moderfrota program.