Jun 28, 2021

Brazil Releases its 2021/22 Harvest Plan

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

The Brazilian federal government released the details of the 2021/22 Harvest Plan last week. The total cost of the plan is R$ 251.22 billion which represents an increase of R$ 14.9 billion or 6.3% compared to the prior year. The annual program will start on July 1, 2021 and run through June 30, 2022.

Most of the funding in Brazil's annual Harvest Plans is directed to subsidized low-interest loans for Brazilian producers. In the 2021/22 Plan there is R$ 126.8 billion available for large producers, R$ 29.1 billion available for medium size producers, and R$ 39.3 billion available for small producers. The interest rate on loans for large producers will go from 6% last year to 7.5% this year. For medium size producers, the interest rate will go from 5% last year to 5.5% this year and for small producers, it will go from 4% last year to 4.5% this year.

Many in the agricultural community are complaining about the intertest rate hike especially considering that the prime interest rate in Brazil is currently 4.25%.

Approximately 71% of the 2021/22 Plan will be directed to production and marketing loans with 29% directed to investment loans for equipment purchases and construction projects. The amount of resources for investments represents an increase of 29% compared to last year. The 2021/22 Plan puts new emphasis on sustainable agriculture.

Sustainable Agriculture - The 2021/22 Harvest Plan increased the amount of resources dedicated to sustainable agriculture by 100% to R$ 5.05 billion. Most of those funds are being put into the Program for the Reduction of Greenhouse Gases in Agriculture (Program ABC). Farmers may borrow money for their Program ABC projects at interest rates of 5% to 7% per year with a grace period of up to 8 years for the first payment and 12 years to pay off the loan. New in the Program ABC this year is funding for:

Irrigation is also considered a part of sustainable agriculture and there will be additional funds directed to the Proirriga Program. There will be R$ 1.35 billion available at interest rates of 7.5% for new irrigation projects.

Small Family Farmers - Brazil's Harvest Plans always have special programs directed to small family farmers in their National Program for Strengthening Family Agriculture (Pronaf). Funding for Pronaf was increased 19% this year to R$ 39.34 billion. These loans will have subsidized interest rates of 3% or 4.5% and 55% of the funds will be directed to production and marketing loans and 45% will be directed to investment loans.

Included in the Pronaf Program this year are funds for forestry plantations, the production of biofertilizers, and rural tourism.

Medium Size Farmers - Medium size producers are included in the National Program to Aid Medium Size Rural Producers (Pronamp). Funding for the Pronamp Program increased 3% to R$ 34 billion. Approximately 85% of the funds will be for production and marketing loans with 15% for investment loans. Interest rates on these loans will be 6.5%.

Grain Storage Construction - A lack of on-farm grain storage is an ongoing concern in Brazil. Funding for on-farm grain storage construction was increased 84% to R$ 4.12 billion. For on-farm storage units with a capacity up to 6,000 tons, the interest rate will be 5.5%. For units greater than 6,000 tons, the interest rates will be 7%. For storage construction loans, there is a three-year grace period for the first payment and 12 years to pay off the loan.

The goal of the grain storage construction program is to increase the on-farm storage capacity by 5 million tons.

Crop Insurance - The 2021/22 Harvest Plan will direct R$ 1 billion to the Crop Insurance Premium program which is 23% less than last year. The goal of the program is to help insure 158,500 producers and 10.7 million hectares of crops. Approximately 20% of the subsidies will be directed toward soybean production, but safrinha corn will receive the highest level of subsidizes. In total, there are 60 different crops available for subsidized crop insurance.

In addition to the major crops, the 2021/22 Harvest plan also directs funds for minor crops, horticultural crops, poultry, hog, beef, and dairy producers.

Bottom Line - The 202122 Harvest Plan increases the amount of funding for production and investment loans especially for smaller and mid-size producers, but the loans will have higher interest rates compared to last year. The Brazilian Treasury Department estimated that R$ 13 billion will be used to offer the low-interest loans.

When the Brazilian Minister of Agriculture announced the 2021/22 Harvest Plan, she emphasized that this program would make Brazilian agriculture more sustainable and more competitive in the world markets. She indicated that in the next decades, Brazilian agriculture must increase productivity in conjunction with environmental conservation and she feels this program will help Brazil in both regards.