May 4, 2006

 

Brazil soy protests unlikely to force government into action

 

 

A Brazilian congressman and former president of the Congressional Agricultural Commission said he doubts protesting soy farmers in Mato Grosso will force the government to quickly approve additional farm aid packages.

 

"I cannot guarantee that this protest will amount to anything. You're dealing with an insane and irresponsible agriculture policy," Congressman Ronaldo Caiado said Wednesday (May 3). Caiado left his post at the Agricultural Commission on Mar 29 after serving his term.

 

Farmers are currently blocking grain silos in Mato Grosso do Sul and Mato Grosso, and a major transit route for soybeans--BR163--in Mato Grosso, which is used to take soy to Sao Paulo and to the Santarem Port on the Amazon River in Para state.

 

The protest is well into its second week. So far, traders say it has only affected the soy business in Mato Grosso thanks to large stocks at ports and plentiful supply in other origins. Mato Grosso is Brazil's top soy producer.

 

Estado de Sao Paulo newspaper, in its Wednesday edition, quoted an unnamed government source as saying the federal government might be forced to announce extra measures in its recently announced farm aid  package, including tax breaks on fertiliser imports.

 

Last month, the Agriculture Ministry announced an emergency aid package that would allow for millions of overdue debts owed to government banks to be rolled over for another 12 months. But most of the centre-west soy farmers rely on private banks--who charge over 15 percent interest a year on farm loans--or work out various credit arrangements with agribusiness firms.

 

Centre-west farmers are also asking for a special exchange rate with the US dollar for agricultural commodities. The dollar has fallen to five-year lows, trading at 2.07 Brazilian reals on Wednesday.

 

The current administration is fiscally conservative and has resisted calls over the last six months to interfere more aggressively to slow the dollar's fall. Each time the government's Central Bank has purchased dollars in the open market, however, the dollar rose against the local currency only to fall again within a day or two.

 

Brazil's Agriculture Minister, Roberto Rodrigues, said the government was considering the tax reduction on imports, Estado de Sao Paulo reported.

 

Farmers are blocking entrance to Archer Daniels Midland (ADM), Cargill and Bunge units in Mato Grosso. The state's governor, Blairo Maggi, also a soy farmer, said the state's soy crushers would likely run out of soy stocks stored in warehouses by the end of the week if protests continue.

 

"In the days ahead this protest is only going to expand," Caiado said.

 

"It's going to get worse in Mato Grosso do Sul and start in Goias this week. No agriculture products will be permitted to travel," Caiado said.