Jun 08, 2010
Brazil Announces New Plan to Build On-Farm Storage
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
A chronic problem for Brazilian farmers is a lack of on-farm storage that limits their options for selling their crops. Estimates are that less than 15% of Brazil's grain production is stored on the farm. As a way to address this problem, the Brazilian Minister of Agriculture, Wagner Rossi, recently announced a program to extend credit to farmers for the specific purpose of constructing on-farm storage. A total of R$ 2 billion will be available through this program.
The maximum amount of money any individual farmer will be allowed to borrow is R$ 1.3 million. The loans can be for as long as 12 years with interest rates of between 5.75 to 9.5%. While these rates may seem high by U.S. standards, they are considerably less than interest rates available through other public or private sources in Brazil.
The lack of on-farm storage causes many problems for soybean farmers in Brazil. Not having on-farm storage forces farmers to transport their soybeans straight from the field to the local co-op or nearby grain company. In order to do that, the soybeans must be transported by semi truck. Therefore, the combines dump into tucks staged along the side of the field. If the trucks are delayed by muddy roads or long lines at the grain elevator, the farmer must halt harvesting operations until empty trucks return. Farms in remote areas could be as much as several hundred kilometers from the nearest grain facility.
During times of heavy rains, any delay in harvesting can cause yield reductions and lower grain quality. That is exactly what happened in January and February of this year when heavy rains resulted in significant reductions in both yield and quality of the early maturing soybeans in Mato Grosso.
The lack of on-farm storage can also force farmers to sell their soybeans at a time when prices are generally at their lowest. Additionally, by having to transport their crop during the peak of the harvest season, farmers will also have to pay the highest freight charges as well. There are many advantages of being able to store soybeans and corn on-farm, but farmers have not been able to secure credit in order to build the necessary storage.
The lack of on-farm storage can also force farmers to sell their soybeans at a time when prices are generally at their lowest. Additionally, by having to transport their crop during the peak of the harvest season, farmers will also have to pay the highest freight charges as well. There are many advantages of being able to store soybeans and corn on-farm, but farmers have not been able to secure credit in order to build the necessary storage.