June 27, 2005

Brazil's soy expansion slows from poor financial support
 

Analysts fear that the severe lack of government and private sector credit for Brazilian soybean farmers would halt soy expansion, and could even cause the current 50 million acres of planted area in the country to fall by 10-15 percent.

Last season, planted area grew by only 8 percent, compared to a huge 20 percent annual growth during the past decade.

The government traditionally provides a loan of about 30 percent of working capital needed to plant crops, which is about US$3.8 billion. However, farmers said it was insufficient following its lack of increase over the past three years and huge cost increases during this period. 

On the other hand, one-third, or US$5 billion worth of government loans to farmers have been defaulted on so far this year and the government is unwilling to renegotiate farm debt.

The government has also denied requests by farmers to lift tariffs on imports of vital inputs such as fertilisers, fuels and herbicides, which could reduce costs by 20-30 percent.

Private sector financial loans have also fallen greatly because many soy farmers were unable to meet contractual obligations of soy delivery after the recent severe drought.