Sep 16, 2016
Brazilian Farmers Starting off New Growing Season less Capitalized
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
With the termination of the soybean-free period on September 15th, Brazilian farmers are now allowed to start planting their 2016/17 soybean crop. They are starting off the new growing season less capitalized than in previous years. This is especially true in central Brazil and northeastern Brazil where soybean and safrinha corn yields were significantly impacted by hot and dry weather during the last growing season.
In the state of Mato Grosso, which is the largest soybean and corn producing state in Brazil, the statewide soybean yield declined to approximately 49 sacks per hectare in 2015/16 (42.6 bu/ac) compared to 53 sacks per hectare the year before (46.1 bu/ac). The situation for the safrinha corn production in the state was worst. The corn yield in Mato Grosso declined to 76 sacks per hectare (70.2 bu/ac) in 2015/16 compared to 108 sacks the year before (99.7 bu/ac). The Mato Grosso Institute of Agricultural Economics (Imea) estimates that 180,000 hectares of corn in the state were abandoned due to very low yields. As an illustration of the importance of Mato Grosso in Brazil's total soybean production, farmers in the state would typically produce as many soybeans as farmers in Iowa, Illinois, and about half of Indiana combined.
Imea estimates that at least 40% of the cost of producing the 2015/16 crops in Mato Grosso came from producers own resources and as a result, they now have less of their own resources to invest in the 2016/17 crops. In addition, credit is currently very tight in Brazil and interest rates are very high. The prime rate in Brazil is now 14.25%, but many farmers are eligible for subsidized production loans from the government at interest rates of 8-12%.
Many farmers in central and northeastern Brazil have been petitioning for a change in policy which would allow farmers to extend the payments on their 2015/16 production loans due to the poor yields obtained in 2015/16. The National Monetary Council (CMN) recently announced that farmers in the most severely impacted areas will be eligible for a program allowing them to extend their loan payments for a period of five years.
Payments for production loans will be extended for five years and payments for investment loans for such things as machinery purchases that are due in 2016, will be extended one year past the end of the original contract. Only farmers in municipalities that declared a state of emergency after October 1, 2015 will be eligible for the program. The program will be available only for investment loans for farmers in center-west region of Brazil, which includes the states of Mato Grosso, Mato Grosso do Sul, and Goias. In the states of Bahia, Maranhao, Piaui, Tocantins, and Espirto Santo the program will be available for both types of loans.