Plano Safra gives Lula a vote of confidence with the sector – 06/27/2023 – Market

The 2023/24 Crop Plan takes place in a period of record harvest, low prices in the field, high production costs and high interest rates. Within this scenario, the government chose to increase the volume of resources and maintain interest rates close to those of the 2022/23 plan.

The so-called business agriculture, which brings together large and medium-sized producers, will have BRL 364 billion available for the period from July 1 of this year to the end of June 2024.

The volume surpasses last year’s by 27%, considering what was destined to medium and large producers in the harvest that ends.

The evaluation of several entities of the sector was of acceptance. With this, the government of Luiz Inácio Lula da Silva (PT), which generates a certain distrust in most rural producers, may gain a vote of confidence.

Some points, however, such as free interest rates and resources for rural insurance, mainly in a period of repetition of climatic effects in various parts of the country, concern producers.

The CNA (Confederação da Agricultura e Pecuária do Brasil), one of the main representatives of the sector, and which supported the continuity of the previous government, says that the volume of resources is within what the sector asked for. “The challenge is to see the resource arrive continuously, without interruption and without failures along the way”, says José Mário Schreiner, the entity’s vice-president.

Pedro Lupion (PP-PR), president of the FPA (Frente Parlamentar da Agropecuária), says that it is necessary to recognize the government’s effort to guarantee a robust volume of credit, but equalization is the most important thing to guarantee the minimum stability.

For Paulo Pires, president of FecoAgro (Federation of Agricultural Cooperatives of the State of Rio Grande do Sul), the plan has highly positive points. Interest rates are high in the country and the Safra Plan cannot escape that much, he says.

The increase in the plan’s resources is 27%, but free interest rates are a cause for concern, says Alexandre Velho, president of Federarroz (Rio Grande do Sul Rice Growers Association), a state that has suffered repeated effects of climate change.

Ivan Wedekin, from Wedekin Consultoria, says that the core of the program is the equalization of interest rates. At the beginning of July 2021, Selic was at 4.25%, and the cost of the agricultural policy was BRL 9.6 billion. In 2022, the Selic was at 13.25% at the beginning of July, which resulted in expenditures of BRL 18.6 billion for the Treasury.

The Selic rate, which should start to decline, is forecast at 9.25% in December 2024. This will reduce the pressure on Treasury spending.

The Crop Plan also brings two important points: the reduction in the interest rate for some investments and the search for a more sustainable agriculture.

At a time of continuous record harvests and falling prices, the country is beginning to suffer more seriously from the effects of lack of storage. The arrival of corn requires a withdrawal of soybeans from warehouses, even in periods of lower prices.

The producer, however, lost the chance to increase its storage capacity in the period of strong price acceleration and good profitability.

In last year’s plan, R$ 5.23 billion were made available to the sector for the construction of warehouses. Only R$ 2.68 billion were accessed.

Wedekin says there are resources but little demand. Schreiner, from the CNA, highlights the difficulties in accessing this credit. This year, the total volume will be R$ 6.65 billion, with rates from 7% to 8.5%.

The look at building an agriculture with more sustainable bases is a necessary advance for the country. A good part of agriculture is already done with a view to sustainability, but the noise caused by the misconduct of some —not always denounced with the necessary rigor by the sector itself— sends a bad message from Brazilian agriculture.

The pursuit of sustainability, however, requires investment and management, items not always available to medium and small producers. Property management, an agricultural policy instrument, would help in the search for sustainability.

The reward promised by the government may be far from those who do not have the means for this evolution.
In addition, the basis for this award is in the CAR (Rural Environmental Registry) already analyzed by the government, which has been slow in this action. According to the CNA, only 20% of the farmers’ CARs have already been evaluated, which reduces the number of those who can obtain the benefit.

The emphasis on recovering degraded pasture areas, which can be used for grain and crop-livestock-forest integration, is also important for the sector. The occupation of degraded areas prevents the advance of livestock and grain production over the forests, reducing international pressure on Brazilian products.