June 5, 2013

Brazil President Announces 15% More Resources for Harvest Plan

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

The Brazilian President and the Minister of Agriculture released the government's Harvest Plan for 2013/14 yesterday in Brasilia. The plan calls for spending R$ 135 billion on the agricultural sector and another R$ 20 billion specifically for assistance to small family farmers. This represents a 15% increase over last year's spending plan. The new plan takes into account estimates that Brazil's total grain production in 2013/14 could reach 185 million tons. The 2013/14 Harvest Plan will start on August 1st.

Of the total, R$ 97.6 billion will be for production and marketing loans and R$ 38.4 will be for agricultural investments. The major part of the plan will be in the form of subsidized loan programs. Most of the production loans from the government will be at an interest rate of 5.5% compared to 12% if a producer went to his local bank. In the 2012/13 harvest plan, interest rates were lowered from 6.75% to 5.5% where they remain for the new plan. Production loans for medium size producers will be at an interest rate of 4.5%. The interest rates will be even lower at 3.5% for the purchase of equipment, irrigation systems, or the construction of new storage units. Loans for the establishment of sustainable agricultural practices will be 5%.

The building of additional grain storage in Brazil is a key component of the new plan. The Minister of Agriculture announced that R$ 25 billion would be made available in the form of low interest loans over the next five years to build private storage facilities with five billion available this year. Interest rates on the loans would be 3.5% and burrowers would have 15 years to pay off the loans. An additional R$ 500 million would be spent on doubling Conab's grain storage capacity and modernizing their existing storage units.

There will be R$ 6 billion of credit available for the purchase of agricultural equipment and R$ 400 million to purchase irrigation systems.

The government also increased the amount of credit available to invest in technologies geared for their Reduced Carbon Emission Agriculture Program (ABC). Funding for the program jumped from R$ 3.4 billion in the last plan to R$4.5 billion in the new plan. Crop insurance also received increased funding from R$ 400 million in last year's plan to R$ 700 million in the new plan with the goal of insuring 10 million hectares of crops for 96,000 producers.

The limit on production loans for each individual was increased from R$ 800,000 to R$ 1 million and on marketing loans from R$1.6 million to R$ 2 million.

These low interest rates represent a significant savings for Brazilian producers especially since they are lower than Brazil rate of inflation (6% to 7%).