May 29, 2014

Cooperatives in Southern Brazil work to Overcome Storage Deficits

The state of Santa Catarina in southern Brazil is like many other states in Brazil in that there is a critical lack of grain storage in the state. The total amount of grain storage capacity in the state is a little more than 4 million tons and the state generally produces approximately 6.5 million tons of grain per year. As a result, the state can only store 60% of its grain production when ideally the figure should be 120%.

According to the Organization of Cooperatives in the State of Santa Catarina (Ocesc), there are 53 agricultural cooperatives in the state with 63,000 members and collectively the cooperatives have a storage capacity of 2.3 million tons. The cooperatives have been practically the only entity building new grain storage facilities in the state. They have invested R$ 150 million in recent years to increase their capacity by 250,000 tons.

A study by Ocesc indicated that the cooperatives in the state needed to build 42 new storage units in 41 cities with a combined capacity of 520,000 tons in order to meet the needs of the cooperatives. The total investment for these facilities is estimated at R$ 246 million reals.

To address the lack of grain storage in the country, the Brazilian government started a R$ 25 billion real program last year called the Increased Storage Program (PCA). The program is designed to loan out 5 billion reals per year for five years for the sole purpose of construction additional storage facilities. The loans carry an interest rate of 4% and 15 years for repayment. The interest rates are significantly below the current prime rate of 11% with the federal and state governments making up the difference.

Only 16% of the funds available for the first year of the program have been allocated in the state. The slow pace is being attributed to onerous environmental licensing and a general scarcity of contractors and skilled construction workers. Many of the workers needed to build storage facilities have been employed over the past several year constructing sports facilities for the 2014 World Cup.