Brazil Announces 2011-12 Farm Credit Plan

Brazilian President Dilma Rousseff will announce the country’s official farm credit plan on Friday with the stated aim of supporting the wave of agriculture investment in South America.

As is normally the way with the annual plan, the Agriculture Minister and his officials have already leaked most of the details.

The government will increase the farm credit budget by 7% next season to R$107 billion ($67.7 billion) and raise the volume of subsidized credit to R$64 billion.

According to Agriculture Minister Wagner Rossi, the priority is to promote modern practices on the farm by facilitating the purchase of new farm machinery and financing the greater use of farm technology. Brasilia also wants farmers to diversify their crops, reducing the dependence on soybeans and, to a much lesser extent, corn.

To that end, credit ceilings for food staples such as rice and beans have been brought up to the level offered for soybeans at R$650,000 per farmer.

Raising the limits also helps medium sized farmers, a group that has been neglected in recent years, according to Rossi.

“We have paid great attention to small family farms, offering them special credit lines, and the big exports, orphaning those in the middle,” said the minister.

The government will also promote new machinery and storage purchases by raising the credit ceiling on investment lines to R$300,000 per farmer from R$200,000.

Brazilian farmers have enjoyed excellent results over the last two years and have plowed much of their profits back into their businesses. But producers remain starved of credit as commercial loans are difficult to obtain and expensive, while official credit is not sufficient to cover operating expenses. Trading companies such as ADM, Bunge, Cargill and Louis Dreyfus end up filling the gap.

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