Brazil's government Tuesday announced its farm credit budget for the 2013-14 season.
Agriculture Minister Antonio Andrade said the budget, traditionally announced in June, would grow 18% to 136 billion reals ($64 billion) for the 2013-14 season, with 97.6 billion reals directed to operating credit and a further 38.4 billion to investment.
Grain farmers have become much better capitalized over the last five years. Soybean farmers in Mato Grosso financed 40% of their last soybean harvest with their own funds, up from 5% in 2007-08. Still subsidized government farm credit remains very important to the local industry.
The crop financing will carry an average interest rate of 5.5% per year, well down on the commercial working capital rate of around 10%.
The biggest change in the new budget was the inclusion of a beefed-up line for silos and storage worth 25 billion reals.
Brazil has a chronic lack of storage, with space sufficient for only two thirds of the grain crop. It is part of a wider infrastructure deficit that has caused grain logistics to partially buckle under the weight of record soybean and corn crops over the past 12 months.
The storage credit will be offered over five years at an interest rate of 3.5% per year and with repayments over 15 years.
"The credit corresponds to 65 million metric tons of storage ... That will resolve our current storage deficit," said Andrade.
The Agriculture Ministry projects the Brazilian grain crop will grow slightly from last year to 190 million metric tons.
The budget for crop insurance also rose, although it remains insufficient to cover all but a small portion of production. The government will offer 700 million reals for crop insurance next year, covering 60% of crop costs. It hopes to insure 25 million acres, or around 15% of planted area.
Alastair Stewart can be reached at email@example.com
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