May 29, 2006

 

Soy top priority of Brazil's government buying programme

 

 

Brazilian agricultural policy director Ivan Wedekin said Friday (May 26) that soy will be the top priority in the government's buying programme in 2007, a move that came as a surprise to farmers.

 

Wedekin told reporters that of the 2.8 billion Brazilian reals available for the government's buying programme (PROP), soy would replace corn as the new no. 1 commodity auctioned each month by the government to local industry and farm cooperatives. He did not elaborate on the reason, but it is likely that the extensive financial crisis on Brazilian soy farms led the government to agree to include soy in PROP. The programme previously had not included soy.

 

Wedekin had said in the past that he doubted soy would ever be included in the government's purchasing programmes because of the sheer volume of soy in the Brazilian market.

 

But low local commodities prices have most Brazilian soy growers selling their soy below the cost of production. Farmers are facing more than two years of debt burdens on top of the low market prices, leading to debt defaults to Brazil's massive agribusiness sector, which is rural Brazil's main creditor. Agribusiness makes up about 36 percent of Brazil's total export volume. The soy trade is also the main source of tax revenue for large states like Mato Grosso.

 

Brazil offered at auction 2 million tonnes of soybeans Thursday for the first time, selling 29 percent, mostly to local soy cooperatives.

 

PROP auctions have been used for corn and rice in Brazil for years. Both products will continue to be part of the programme, but take a back seat to soy, Wedekin said, in order to provide protection to soy farmers.

 

"This is a light at the end of the tunnel," said Adilson Jacinto, a soy grower in Mato Grosso. "At least now I can better calculate costs for next year." Government auctions protect farmers from falling prices by subsidising put options, which are price guarantees above the current market price for soy.

 

Wedekin and Agriculture Minister Roberto Rodrigues announced the emergency farm aid package on Thursday.

 

The aid measures include automatic debt extensions of four years for 80 percent of the government debts owed by soy farmers in the centre-west, and 50 percent of the government debts owed by soy farmers in the south and southeast.

 

Soy farmers have been pressuring the government to act for the last four weeks, protesting in various states. Farmer protests in Mato Grosso and Mato Grosso do Sul impeded the soy trade all month.

 

Jacinto said members of some farm associations said they would continue protesting because they were still unhappy with the package.

 

"The question is how long can we sustain this protest. It's getting tiring. It's been going on for 36 days already," Jacinto said.

 

"It's obvious that this package will not solve every farmer's problem, but it will help 85 percent to 90 percent of Brazil's farmers," Wedekin said in the local Estado newswire Friday.