November 7, 2008

Brazil government guarantees minimum prices for grain farmers

Brazilian Finance Minister said Brazil's government will guarantee minimum prices for farmers in the 2008-09 crop season, local news service Estado reported.

Minister Guido Mantega said the government is going to either buy products and keep stocks or pay the difference between the market price and a fixed minimum price, Estado reported. The ministry press office couldn't be reached for further comment.

Steve Cachia, a soy-market analyst at brokerage firm Cerealpar, said the price guarantee won't have a major impact on soy farmers, because they are still making profits in most regions.

But Cachia said the guarantee is more important for corn farmers who are facing low prices. "Without the price guarantee, some of Brazil's corn farmers might stop planting," said Cachia.

Brazilian farmers recently experienced rising costs of fertilizer, while at the same they were battered by falling crop prices and the global credit crisis.

As a result, many farmers are cutting back on using fertilizer or planting crops due to a lack of credit.

Brazil's National Commodities Supply Corp., or Conab, said Thursday that Brazil should produce 139.6 million tonnes to 141.8 million tonnes of grain crops such as soy, corn and wheat in 2008-09, down 1.9 percent to 4.1 percent compared to 2007-08.

Brazil is the world's second largest producer of soy after the US.