South America Calling

The Brazilian government has seen demand for official farm credit surge ahead of 2014-15 grain planting.

Farmers are looking for more credit as soybean-planted area grows and low prices squeeze previously ample cashflow.

Farm loans in the first two months of the new crop year (July 15 to Sep 15) were 43% higher than the year before, Osmar Dias, vice president of agribusiness at the state-run Banco do Brasil, told local business daily Valor Economico.

Brazil will make available R$157 billion in farm credit in 2014-15, the same that was contracted last year.

Funds contracted at the start of the season are typically employed to buy crop inputs. However, the bureaucracy involved in obtaining investment credit means many farmers max out on operating credit, and then reallocate for other means including paying off other loans.

While the amount of available farm credit has risen, crop insurance funding remains lamentable.

The government gained plaudits two years ago when it announced a push to increase insurance coverage and pledged a budget of R$700 million ($300 million) per year for insurance premium subsidies. But it has only allocated R$400 for 2014-15, of which just R$140 million goes to covering summer crops.

In 2013, only 13% of Brazilian planted area had insurance cover and the figure will not increase this season unless more funding appears.

Alastair Stewart can be reached at Alastair.stewart@dtn.com

(ES)

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