May 22, 2014

President Rousseff Announces 2014/15 Harvest Plan for Brazil

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

Brazilian President Dilma Rousseff announced this week the government's new Agriculture and Livestock Plan (PAP) for commercial agriculture during the 2014/15 growing season (this is also known as the Harvest Plan). The 2014/15 PAP Plan calls for an increase of R$ 20 billion year-on-year (+14.8%) to R$156.1 billion to provide credit financing for commercial agriculture. In addition to the higher funding levels, the interest rates charged to farmers will increase from 5.5% to 6.5%. The plan takes effect on July 1, 2014 and runs through June 30, 2015.

Even with the 1% increase in interest rates, production loans from the government are still a bargain in Brazil where the prime rate is 11%. Specific programs within the PAP Plan have interest rates lower than 6.5%. For construction of grain storage and the purchase of irrigation equipment the interest rate is 4%. A very popular program for the purchase of farm equipment maintained the interest rates at 4.5% to 6%. The primary way that the Brazilian government supports agriculture is through the subsidized loan programs provided for in these yearly plans. The Minister of Agriculture indicated that the cost to the government to subsidize the interest rates would be R$ 7 billion.

The Agriculture and Livestock Confederation of Brazil (CAN) had been asking for R$ 170 billion for commercial agriculture, but they are satisfied that all their needs have been met at the lower level of funding. The funding for the 2014/15 PAP Plan is 3.9 times more than ten years ago during the 2004/05 growing season.

The President and the Minister of Agriculture both feel that Brazil could easily surpass 200 million tons of grain production next growing season. At the start of this past growing season Conab was estimating that Brazil would produce 195 million tons of grain in 2013/14, but a severe drought in parts of southern Brazil reduced grain production to 191 million tons.

The plan announced this week is for commercial agriculture and the funding for small family farmers will be announced next Monday.

President Dilma also emphasized that the country will produce roughly one ton of grain per inhabitant in an environmentally sensitive manor although that would probably be disputed by environmental groups.

The president of CAN, Katia Abreu, would like to see more resources devoted to the crop insurance program. The government reported that 9.6 million hectares of crops were covered under crop insurance during the last growing season, which corresponds to approximately 17% of the total crop production. She feels that Brazil should have a goal of insuring 50% of the countries crop production, but unfortunately funding for the program remained unchanged in the 2014/15 PAP Plan at R$ 700 million.