Agribusiness default rate in Brazil rises to 7.3% in Q1 2024

The default rate in Brazil's agricultural sector reached 7.3% in the first quarter of 2024, according to data released by Serasa Experian. 

The credit analysis agency indicated that this result represents an increase of 0.8 percentage points compared to the same period last year. To calculate this index, debts overdue for more than 180 days and up to five years, with amounts starting from BRL1,000, related to agricultural financing and activities, were considered.

The increase was considered ″relatively positive″ by Serasa's Head of Agribusiness, Marcelo Pimenta. According to him, despite the rise, the activity suggested ″stability in the default scenario″ of one of the main sectors of the Brazilian economy. 

″Despite the various challenges faced by the sector in the past year, such as the decline in commodity prices and the rise in agricultural input costs, default numbers in agribusiness remained practically stable, and most Brazilian rural property owners managed to honor their financial commitments,″ he stated.

Financial institutions funding agricultural activities were responsible for the largest share of default, at 6.5% during the period. In contrast, the percentages of indebted rural property owners in the agricultural sector and other related areas were significantly low, below 0.2%. 

″It is important to highlight this differentiation because if overall only 7 out of 100 rural property owners are in default, in this breakdown, the percentage is almost nonexistent,″ Pimenta said.

These categories encompass a wide range of essential products and services for the sector, such as agro-industrial processing, wholesale agro-trade, agribusiness support services, production and resale of inputs and agricultural machinery, as well as rural producers, non-life insurers, transportation, and storage.

According to Serasa’s head of agribusiness, an interesting point is that older property owners outperformed younger ones in terms of default. While the non-payment rate for owners aged 80 and over was 3.1% in the first quarter, it reached 11.3% for producers aged 18 to 29 during the same period.

Serasa stated that by agricultural region Brazil’s North Region recorded the highest default rate in the first three months of 2024, at 10.5%. Next came the Northeast Region, at 9.1%, and the Matopiba Region, which encompasses parts of the Brazilian states of Maranhão, Tocantins, Piauí, and Bahia, at 9.0%. On the other hand, the South Region of Brazil registered the lowest default percentage, according to the survey, at 4.9%.

″This scenario may change due to the negative climatic impacts caused by this year's floods in the South Region,″ warned the Head of Agribusiness at Serasa. 

However, he noted that factors such as the suspension of negative records announced by the National Association of Credit Bureaus (ANBC), the good penetration of rural insurance, and the experience of the rural population may mitigate these effects. The Southeast and Central-West agricultural regions also showed lower results, with default rates of 6.2% and 7.5%, respectively.

(Editing by Leonardo Gottems, reporter for AgroPages)

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