Brazil: farmers avoid banks and seek alternative crop financing

Facing the difficulties of credit access through traditional banks, more and more Brazilian rural producers have sought other sources to finance the 2015/2016 crop season. That was revealed by the Second Market Survey of Fiesp (Federation of the Industries of São Paulo) and the Organization of Brazilian Cooperatives released recently.

The percentage supported by financial institution dropped from 51% (2014/15 season) to 42% at the current cycle (data collected in the second quarter of 2015). Besides the banks, the trading companies also have lost ground as source of funding, falling from 3% to 2%. As an alternative, farmers have funded production with equity, which had an increase of 35% to 41% in this type of loan modality.

Farmers have also sought cooperatives, expressing a growth of 8% to 10% for the same comparison basis. Yet according to the Fiesp survey, during the fourth quarter of 2015 the dealerships had a share of 3% - an increase of one percentage point, while the industries share reached 2%: the double of the index registered previously.

"Due to the cost increase of the current production season, observed mostly due to currency devaluation, the farmer was forced to resort to finance its cost necessities. In this scenario, cooperatives – through the direct relationship with its associates – enable that farmers maintain the investment levels and business expansion, through exchange operations and direct purchase of inputs with adequate deadlines, serving as an important option for financing its operations,” explains the president of the Organization of Brazilian Cooperatives, Márcio Lopes de Freitas.

The manager of the Farm Business Department of Fiesp, Antonio Carlos Costa, commented that there is yet fear by the producers side because of the difficulties faced last year. “The preoccupation is justified by the moment that the research show that most farmers concentrate the input purchases for the summer season between the months of March and May. With the delay of rural credit releases last year, several farmers were forced to revise purchase planning”.