May 24, 2017
Political Crisis in Brazil could hurt the Agricultural Sector
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Farm organizations in Brazil are concerned that the political turmoil engulfing Brazil could result in paralysis in Brasilia which in turn, could jeopardize their legislative agenda. The Brazilian Congress was set to vote in the coming days on legislation modernizing agricultural chemical registration, licensing of new crop varieties, reducing bureaucracy, lowering production costs, and lowering rural taxes. The fear is that all of that legislation is now in limbo.
Additionally, the Federal Government and the Minister of Agriculture are in the final stages of formulating the "Harvest Plan" for the 2017/18 growing season. This yearly plan is the Brazilian equivalent of the U.S. Farm Bill, but done on a yearly basis. The Harvest Plan determines all the farm programs in Brazil including: the amount of resources available for production loans, the interest rates on production and equipment loans, the minimum prices for grain, and numerous other aspects of the farm sector. The Harvest Plan is the blueprint for the growing season.
Brazilian farmers have been pressuring the administration to increase funding for production and equipment loans and to lower interest rates in light of low commodity prices. They have also been asking for increases in the guaranteed minimum prices for grain to offset the current low international commodity prices.
The Harvest Plan is absolutely critical for Brazilian farmers and now it is uncertain what will happen with the program. Many of the farmer's plans for the next growing season depend on the Harvest Plan and now those plans may be put on hold, at least temporarily, until the political situation settles down. The Brazilian financial markets are in turmoil and no one knows what the impact might be on the impending Harvest Plan.
In addition to the immediate future such as the Harvest Plan, the political turmoil could also endanger critical infrastructure improvement projects such as highways and railroads. It's all now up in the air.