Brazilian farmers able to barter crops for ag chemicals

SAO PAULO (Reuters) — Bayer AG’s Brazil unit has been relying on barter for more of its agrochemical sales, swapping its products with farmers for a portion of their crops to keep business healthy as the country emerges from the harshest recession on record.

With accessible credit lines scarce for Brazilian farmers, Bayer will use the barter operations to raise agrochemical sales to more than $300 million this year, said Eduardo Roncaglia, director of structured operations.

The volume of sales through barter operations will represent up to 25 percent of the unit’s total sales this year, up from a mere one percent in 2013, Roncaglia said.

“This is an important tool for producers and distributors to manage risk. And with the credit restrictions in Brazil, we think it is fundamental,” he said.

Bartering is a form of exchange that enables producers to reduce reliance on bank loans to finance the crop as they receive inputs such as agrochemicals from Bayer.

The strategy has also proven effective in times of excess production, which has lowered commodity prices. Those who locked in prices through barter exchanges in the last harvest had results 30 percent better, Roncaglia said.

Bayer does not receive the crops physically, but guarantees purchases as an intermediary between producers and trading companies.

Soy and cotton account for about 80 percent of Bayer’s agrochemical barter operations, but there are contracts involving other crops such as coffee, sugar, and corn.

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