August 25, 2008

 

Cargill expanding credit for Brazil soy farmers
  

 

Cargill Inc. has boosted its loans to Brazilian farmers in 2008 by more than US$100 million over last year despite the credit crunch in its main US market, the company's president for Latin America said Friday (August 22).

 

"We actually increased liquidity compared to last year," Sergio Rial told Dow Jones.

 

Cargill, the world's largest agribusiness group, has earmarked US$500 million in loans this year compared with US$400 million in 2007. The loans are primarily for soy farmers, Brazil's most important farm commodity. Brazil is the world's second-largest soy producer after the US.

 

Brazilian farmers have complained bitterly about the soaring cost of inputs such as fertilizers and fuel. Soy farmers were able to cope with the higher costs when soy prices reached record levels earlier this year. But with soy prices now falling, they are threatening to reduce the area of land planted with soy or to cut production. The extra credit from soy buyers like Cargill helps at a time when overhead costs are rising, and farmers can't always tap their own personal financial well to pay bills and invest in new equipment.

 

Rial said Cargill needs the farmers just as much its big final customers, such as Brazilian food company Perdigao (PDA). "It's important that they are helped when squeezed," he said of the farmers.

 

Other major US-based agribusiness companies have also increased lending this year in Latin America's largest country.

 

Cargill's Brazilian unit, which reported BRL12.8 billion (US$7.9 billion) in net sales last year, handles a mix of soy business for its internal units and clients worldwide from Asia to Europe.

 

The Brazilian unit on average buys between 9 million and 10 million tonnes of soy. Of the total, between 4 million and 5 million tonnes are crushed to make products such as soy oil or soymeal for animal feed. The rest is mainly soy for export.

Cargill is also increasing its soy crushing capacity in Brazil by building a new soy crushing plant in the city of Primavera do Leste in the plains region of Mato Grosso. The soy crusher facility is expected to start operations in June or July 2009, with 600,000 tonnes to 1 million tonnes a year in new capacity.

 

The plant is designed to mainly serve the local market, including meat producers who want soymeal for their cattle, Rial said. Cargill currently has six soy crushing plants and 27,000 employees in Brazil.
   

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