Brazil soy farmers rely on barter for funding

SAO PAULO, Dec 5 (Reuters) – Soy farmers in Brazil’s grain frontier state of Mato Grosso are relying more on barter then on their own capital to secure crop financing, growers association Aprosoja told Reuters on Tuesday.

Based on data compiled by Mato Grosso-based research agency Imea, Aprosoja’s director general, Wellington Andrade, said self funding represented only 19 percent of crop financing in the 2017-18 crop cycle, the lowest in almost a decade.

“The use of own-farmer funding dropped because the producer is under-capitalized,” Andrade noted in a telephone interview. “In spite of a record 2016 harvest, Chicago grain prices remain low and the exchange rate has been a factor affecting farmer gains,” he said.

Brazil’s largest grain producer, Mato Grosso produced 30.5 million tonnes of soybeans in the 2016-17 season, according to government data.

Under barter, multinational commodities trading firms or agriculture product resellers supply inputs to farmers in exchange for a portion of their crops.

As farmers reduced own-capital use to finance their crops, Imea said in a research note, 52 percent of this season’s funding was provided by third parties, up from 38 percent in the prior one.

The main contributing factor to the rise in barter was farmers becoming under-capitalized, Imea said, blaming a recent margin squeeze. The margin reduction was partly caused by a drop in grain prices after a bumper harvest in 2017, the research agency said.

Mato Grosso farmers used 18.6 billion reais ($5.75 billion) in crop funding during the 2017-18 cycle, with 35 percent coming from multinational grain traders and 17 percent from input resellers, the data showed.

For the first time since the 2008-09 crop season, barter represented more than half of crop financing for producers in the state, according to the data.

 

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