May 16, 2016

Blairo Maggi Leads New Agricultural Administration in Brazil

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

Commercial grain farmers in Brazil were glad to see the impeachment of President Rousseff last week and the instillation of Vice President Temer as Brazil's temporary President while Rousseff is put on trial for financial irregularities. Most observers feel the outcome of the impeachment trial will be her permanent removal from office. These are civil proceedings, so there is no potential jail time for President Rousseff for what basically could be called "creative accounting".

Most medium and large scale commercial farmers feel President Temer will be much more in tune with their needs, but the feeling is not universal. Small family farmers and subsistent farmers liked President Rousseff and her Workers Party because of the assistance she provided for them. The "landless poor movement" and the people interested in agrarian reform were ardent supporters of President Rousseff and the former president Lula. They have vowed to be in steadfast opposition to President Temer's new administration.

President's Temer's new cabinet was sworn in late last week, which including Blairo Maggi as the new Minister of Agriculture. Maggi is the former "king of soybeans", a former two term governor of Mato Grosso and he is currently a senator from Mato Grosso. He replaces Katia Abreu, who is a senator from the state of Tocantins and former head of the Brazilian Agricultural Confederation (CAN). He was born in Rio Grande do Sul and holds a degree in agronomy from the Federal University of Parana. Probably no one in the Brazilian Congress knows more about agriculture than he does, but he has both defenders and detractors and he comes with his own set of baggage.

Environmental groups are at odds with him for his promotion of agricultural expansion into the cerrado regions of Brazil and the southern Amazon Region. They blame him in part for rampart deforestation during the 1980's and 1990's. His critics also point out that he made his career as a mega-soybean farmer and grain merchant in Mato Grosso while showing little interest in other major crops such as sugarcane or coffee. Additionally, many farmers in Brazil run small family operations and they are concerned if he will express as much interest in them as did Lula and Dilma. He has also been accused of his own financial irregularities while serving as governor of Mato Grosso and those accusations are yet to play out.

After taking over the role of Minister, he indicated that his first priority was getting the 2016/17 Harvest Plan through Congress and implemented as quickly as possible. The 2016/17 Harvest Plan issued by President Rousseff fell short of farmer's expectations primarily due to the increased cost of credit. It remains to be seen if Maggi can correct some of these perceived shortfalls while Brazil continues to suffer through the worst economic downturn in decades.

Most Brazilian farmers are pleased with the removal of President Rousseff, but they are taking a wait and see attitude toward potential changes in economic policies under President Temer. The new Treasury Minister and Central Bank president both indicated that they want to maintain a weaker Brazilian currency as a way to encourage exports, which is music to farmers ears because agricultural exports currently represent more than 50% of Brazil's exports.

The Brazilian currency has been strengthening in recent months as it became more apparent that President Rousseff would be impeached. As a result, Brazilian farmers slowed down their selling pace for both soybeans and corn. Currently, Brazilian farmers have sold approximately 70% of their soybeans and 60% of their corn. The selling pace is expected to pick up once the political and economic situation settles down.