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June 20, 2019

2019/20 Brazilian Harvest Plan Announced by Ag Minister

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

The Brazilian government announced their 2019/20 Harvest Plan earlier this week indicating that there will be R$ 222.7 billion ($57.7 billion) in financing for the 2019/20 crop, which is basically in line with last year's spending (+0.28%).

The burrowing cost for large producers will increase to 8% this year up from 7% last year. The interest rates for small and medium producers is subsidized by the government and could be as low as 3%. The Minister of Agriculture indicated that the higher interest rates for larger producers was needed in the face of very tight budgets and a desire to hold down the budget deficit. The Minister also indicated that the 2019/20 Harvest Plan places increased emphasis on small producers and subsidized crop insurance.

Of the total credit available, R$ 169 billion will be for production loans with interest rates from 3% to 8%. The total credit for investment such as equipment will be R$ 53 billion with interest rates from 3% to 10.5% depending on the producer. The total credit for marketing crops will be R$ 1.8 billion, which also includes government purchases of grain if needed.

One significant increase this year is a doubling of the subsidies for crop insurance. The goal is to insure 15.6 million hectares with more than 212,000 producers.

Producers will have more options for financing through private banks with government assistance with funds from Brazil's development bank BNDES.

The amount of credit for storage construction will be increased in anticipation of even larger grain crops in the future. The plan includes new programs for yerba mate tea production, fish farming, rum production from sugarcane, and funds for small family farmers to remodel their homes or build new homes. The overall plan is about on par with year's past, but with a higher cost for larger producers.