Lavoro plans to sell inputs worth US$134 million through barter system

The largest distributor and re-distributor of agricultural inputs in Latin America, Brazil’s Lavoro, plans to sell products worth US$134 million through the barter system.

For the 2023/24 season, the group launched the ″Soja Certa″ campaign, which will use this type of contract to sell inputs for the harvest, with soy already currently available or will be in the future.
 
Through the initiative, the company expects to sell agricultural inputs worth BRL700 million.

″Just in 2022, Lavoro agreed contracts worth BRL550 million with the Milho Certo campaign, which has a similar process,″ said Marcos Oliveira (Director of Commodities Operations at Lavoro).

According to Oliveira, the objective is ″to further expand operations in Brazil, through financial instruments that are often not know by the producer but which are extremely important, to mitigate the risks of fluctuations in commodities and increase the profitability of our customers.″
 
Trading within the barter model is carried out on the B3 Stock Exchanges in Brazil, as well as in Chicago and New York in the US, with a financial institution that is a partner of Lavoro acting as mediator.
 
In the Financial Barter-Troca Fácil campaign, farmers buy a certain amount of inputs, and Lavoro offers price insurance per bag of soy. Therefore, there is a guaranteed exchange ratio.

Producers then follow the price of soybeans in the commodities market, knowing that they will have the flexibility to sell their grains at any time with the guarantee of a better price. If the price is lower than initially offered in the insurance, producers can settle their account with a discount. If the value goes up, they will the initially agreed price. Therefore, the transaction provides financial security to producers in both scenarios, whether bullish or bearish, so it is a win-win relationship.
 
For producers who adhere to the Target Operation campaign, another barter tool made available by Lavoro, if the commodity reaches a certain price level, the transaction is automatically ″dismantled″ and the gain is credited to the farmer.

″If the price of soybeans unexpected drop, producers will be protected since the grains have already been sold. In the same way, if the value goes up, we give a bonus to farmers who can already guarantee the necessary inputs for the next harvest. In addition to being an excellent rural property management tool, the operation helps reduce operating costs, which is around 4% to 10%,″ Oliveira said.

The Barter Milho Certo campaign, which took place between October and December 2022, focused on exchanging available or future corn, and sale of inputs reached a value of some BRL550 million.

″We had great success with the Milho Certo campaign, which confirms our vision that Brazilian rural producers are open to innovative financial operations, which can help them protect their crops from the market's inclement weather,″ Oliveira added.

Although it is a sophisticated transaction, Lavoro has committed to simplifying the process for its customers and bringing it closer to the reality in the field. The company offers the necessary support throughout the entire production cycle, from consultancy to planning the harvest, by offering complete packages with the best brands of inputs, following-up and monitoring crops, and supporting the sale of grains.

Lavoro also has a derivatives desk with a dedicated team, which monitors all commodity movements in major world markets.

(Editing by Leonardo Gottems, reporter for AgroPages)