Apr 08, 2015

Bank of Brazil not Issuing Loans for Pre-purchase of Inputs

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

Farmers in the center-west region of Brazil continue to complain that the Bank of Brazil is not issuing loans for the early purchase of inputs for the 2015/16 growing season. These pre-purchase loans are generally issued about the time when the soybeans are being harvested in February and March so that farmers can pre-order and pay for next year's inputs before prices increase. The early purchasing of inputs would be especially important this year because the price of imported items such as fertilizers are expected to increase 25-30% due to the weak Brazilian currency.

Officials from the Bank of Brazil stated that money is not available for these low interest loans at the present time, but that the Bank is offering loans at the normal interest rate of 16%. Needless to say, farmers are not interested in purchasing expensive fertilizers with loans that carry a 16% interest rate.

Everyone suspects that the bank does not want to issue these loans because the new Harvest Plan, which will be announced in May, will have higher interest rates. The Brazilian Minister of Agriculture has already stated that interest rates on these loans will increase from the current 6.5%, but she has not said by how much. Speculation is that the interest rates will increase by 2-3%.

Farmers in Brazil are worried about how much credit will be available for the 2015/16 growing season, what the interest rates will be, and the timing of when the new loans will be available. The 2014/15 Harvest Plan will be in effect until June 30th.