September 2, 2011

More Credit Available for Brazil Corn and Sugarcane Production

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

The Brazilian government is increasing the amount of credit available for farmers who want to plant corn in the Center-West region of Brazil. The new credit limit is now set at R$ 500,000 per individual and it can be applied to either full-season corn or safrinha corn production. The goal of the increased credit is to increase Brazil's corn production in the Center-West region of the country in order to avoid a potential deficit of corn. The government is concerned about running out of corn for the livestock producers in the region and the potential impact that might have on domestic food inflation.

In addition to increasing the amount of credit available for farmers, the repayment terms have also been made easier by extending the grace period until the first payment is due and stretching out the total period during which the loan must be paid back.

A similar program was also initiated for farmers to increase their sugarcane production as well. In the case of sugarcane, the government is concerned about rising fuel prices in Brazil. Ethanol prices in Brazil have already started to spike even though the country is in the midst of the sugarcane harvest. Rising ethanol prices directly impact Brazilian consumers because more than half of all the cars on Brazilian highways use E100 fuel. The gasoline in Brazil is normally an E25 blend, but will be reduced to E20 on October 1st in order to extend the limited supply of ethanol.

During the twelve month period ending in July, the Consumer Price Index in Brazil rose 6.8% which was above the 6.5% goal set by the Central Bank.