June 8, 2017

2017/18 Harvest Plan for Brazilian Farmers Disappoints

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

The Brazilian President and the Brazilian Minister of Agriculture announced on Wednesday morning the "2017/18 Agricultural and Livestock Plan" for the upcoming growing season. The plan, which is commonly referred to as the "Harvest Plan", contains R$ 190 billion in total resources and reduced interest rates compared to last year. The total amount of resources available is actually less than last year when inflation is taken into account.

By far, the major component of the "Harvest Plan" is subsidized low-interest production loans for Brazilian farmers. The loans will be available starting July 1st. This program is in addition to the R$ 30 billion announced last week that is geared to small family farmers.

The amount of resources available for production loans and equipment loans is R$ 150 billion which includes R$ 116 billion with subsidized interest rates (77% of the total) and R$ 34 billion with market interest rates from local banks (23% of the total). The interest rates for the subsidized loans will be 7.5% to 8.5%, which is down 1% from last year. The interest rates from local banks will probably be in the upper teens depending on individual circumstances.

For large farmers, the limit on production loans will be R$ 3 million and for medium size producers, it will be R$ 1.5 million. Farmers will have 14 months to pay off the loans.

The interest rates on what the government considers its priority programs, which are for building storage and agricultural innovation, declined 2%. The interest rates on these loans will be 6.5%, which is down 2% from last year. Agricultural innovation involves such things as precision agriculture and internet connectivity.

The amount of resources available for grain storage construction is R$ 1.6 billion and farmers will have 15 years to pay off the loan. For agricultural innovation, there will be R$ 1.26 billion available with a limit of R$ 1.1 million per farmer.

There is R$ 9.2 billion available for tractor and combine purchases, which is up 82% compared to last year. Equipment loans is limited to 90% of the purchase price with 7 years to pay. An additional R$ 1.5 billion line of credit will be made available through the National Development Bank (BNDES) for the renovation of sugarcane fields.

This is not the plan farmers had been dreaming about, but with all the problems facing Brazil, this is probably about as good as they could expect.