May 29, 2006

 

Brazil's soy farmers say aid package inadequate

 

 

The early reaction was somewhat negative Friday (May 26) from soy producer associations in Brazil's centre-west to the government's new farm aid package announced the previous day.

 

"This farm package does not help the majority of (centre-west) soy farmers," said Rui Prado, president of the Mato Grosso Soy Producers Association. Mato Grosso, Brazil's leading soy-producing state, is expected to harvest over 15 million tonnes of soybeans in the 2005/06 crop.

 

Prado said the new measures, which extend government farm debt payments for another four years, are "good news" but added that government loans account for just 16 percent of the financing on centre-west soy farms. The rest comes from trading companies. On a national level, 23 percent of farm financing comes from government-subsidised low-interest credit at an 8.75 percent annual rate.

 

"This package is poorly detailed. Once again, we have another emergency aid package that just prolongs the debt burdens," said Antonio Galvan, president of a soy producers association in Mato Grosso, currently meeting at the state level to discuss farmer reaction to the measures.

 

The new package marks the second time in two months that the government announced a debt extension. In March, the government said it would extend debts due in 2005 and 2006 for another 12 months.

 

Under the rules announced Thursday, all soy farmers in the center-west automatically get 80 percent of their government debts extended for four years. In the south and south-east, 50 percent of all government farm debts will be automatically extended for four years.

 

"The package definitely helps alleviate the financial pressures in the short term," said Getulio Pernambuco, an economist at the National Agriculture Federation (CAN).

 

"It will take the pressure off farmers who have government farm debts due and will allow them to pay private lenders. Of course, this does not mean they will have much extra money sitting around for next year. Soy is selling below the cost of production as it is. Their income is greatly compromised and that's not going to change," Pernambuco said. He added that Mato Grosso's soy planted area will likely be reduced by as much as 30 percent in 2006/07.

 

All month, farmers have been protesting low local commodities prices and their inability to pay debts, shutting down commercial transportation of soy and other farm products in Mato Grosso and Mato Grosso do Sul.

 

"I spoke with our farmers today, and they are divided. Not everyone is happy with the government's package," said Airton Zalemena, chief agronomist at Cootricampo, a soy and wheat cooperative in Rio Grande do Sul.

 

Rio Grande do Sul's soy farmers suffered financial hardship in the 2004/05 soy crop when more than 70 percent of the crop was lost to drought. Market prices for soy in the south are slightly above the cost of production, unlike soy prices in the centre-west soy belt. Rio Grande do Sul is the third largest soy producer.