With no La Niña effect this year, October once again brought the increasingly frequent rainfall that leads up to a new planting season. But there's rain, and then there's rain. Do those dark clouds on the horizon mean one of those slow, day-long soakers is on its way? Or, that some serious turbulence is headed this direction?
As Brazil starts planting, there's a lot on farmers' minds. First and foremost for a lot of producers here: credit.
The U.S. government may not be alone in injecting money into the system in order to get credit going. At least not if Mato Grosso farmers have their way.
A few years of cruel exchange-rate tricks that made the greenback expensive at input-purchasing time and cheap at soybean harvest have contributed to a lot of farmers having gone out on a limb, credit-wise. The government offers ag loans at a subsidized interest rate, of course — but only to those who qualify. Pesky liens and unmet payments can keep you from being eligible for those loans.
Never fear, though, for the processors will extend credit against soybeans in the ground if you're willing to contract to sell big parts of your crop at pre-set dates. And those selling dates didn't turn out to be among the most favorable ones of the year for soybean prices.
Whether credit from processors is a good deal or not, it's become a motor of the agricultural economy here, given the slowness of the official government credit system.
THAT'S ONE REASON why farmers from Mato Grosso state — traditionally Brazil's largest soybean producer — went to the federal capital to ask the ag minister to inject some $1.5 billion into those same processing companies this year, since even their crop-in-the-ground credit was becoming hard to get. The state's needs weren't mere detail: It was estimated farmers needed $6 billion in credit to get the 2008-2009 crop planted.
Jose Mario Schereiner, a leader of the National Agriculture Commission, told a reporter for the Gazeta Mercantil business newspaper in October that “we have 20% of farmers still with no credit, which means a deficit of $9.6 billion. What's the farmer to do? Reduce his planted area or use fewer inputs?”
Glauber Silveira, president of the Mato Grosso Soybean Producers' Association, says, “We need an immediate injection of producer credit through the processors.”
Former Ag Minister Roberto Rodrigues was thinking about the credit problem in Brazil as far back as June, when he wrote that, “There is a private financing system, run by inputs suppliers, by the trading companies and by agribusiness.” And he cited estimates that the banking system, farmers and soybean processors are each responsible for one-third of the total money spent on putting in a crop in Brazil each year.
It remains to be seen how much, if at all, the lack of credit — combined with inputs prices that are only now beginning to come down from their triple-digit year-on-year increases earlier — will affect how much planting Brazilian farmers can actually get done this year.
In mid-October as the world teetered on the verge of a serious credit crisis, would indebted farmers in Brazil's No. 1 soybean-producing state find a way to get a crop in?
James Thompson is a writer and marketing consultant based in Uberaba, Brazil, a center of soybean, corn, cattle and sugarcane production. You can contact him at jamesth@terra.com.br.