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Brazil's On-Farm Grain Storage Builds

Luis Vieira 05/20/2014 @ 2:49pm Agricultural freelance reporter from Porto Alegre, Brazil. Editor of AgroSouth-news.com

Brazilian farmers have accessed a total of US$ 1.8 billion as part of a storage plan financing the construction of silos and warehouses in 2013-2014. Yesterday, as part of the Brazil Farm Bill, or Plano Safra as it is called here, the government announced a total of R$ 156.1 billion (US$ 70.4 billion) on credit lines available to farmers. Of those, nearly US$ 2.3 billion would be available to farmers and cereal traders to increase storage capacity. On the other hand, the average interest rate paid by farmers increased 1 percentage point to 6.5% a year.

Brazil's agriculture minister, Neri Geller, said that the interest-rate hike will not have a greater impact on farmers. The overall economy was hit with a 3.5% rate increase, while farm-lending rates went up just 1%. He believes farmers were preserved. "The adjustments were way below the interest rates of the whole economy (the Central Bank set up from 7.5% to 11% in the last few years)", Geller affirmed.

Kepler Weber, a company that supplies approximately 50% of all silos in Brazil, is bullish on sales even after a 40% increase of the market in the last season. According to the company's sales superintendent, João Tadeu Vino, the expectation is that sales remain strong for the next five years. 

"As long as there is borrowing, investments will continue. From July, these investments and borrowings will tend to happen even faster," he says in an interview with Agriculture.com.

Questioned about the knowledge of smaller and midsize farmers on the importance of storage, Vino said awareness has increased stunningly. "An impressive number of people come to talk to us at farms shows such as Coopavel in Paraná, the Bahia Farm Show, ExpoDireto in Rio Grande do Sul, and Expointer in Rio Grande do Sul", explains Vino.

From a region where midsize farmers have from 740 acres to 1,2345 acres, Claiton Santos, owner of TS Brokerage from Passo Fundo, northwest of Rio Grande do Sul, observes that what makes farmers invest in storage is the amount of time they have to pay back to lenders. 

"With low interest rate, they have from 10 to 30 years to pay it back. They avoid paying R$ 6 (US$ 2.71) per bag to store in a warehouse of a third part and also avoid investing on expensive land and the worst prices. But still it does not follow the growth of planted area," Santos tells Agriculture.com.

In Luís Eduardo Magalhães, in the west of Northeastern state of Bahia, the average farmer has 4,942 acres. But what boosts investment in that region is the growing competition from even bigger producers. "Even though the farmers here are big, the storage deficit is still high. Now they tend to invest more because major corporations such as SLC and Maggi are coming," explains Raimundo Gregório, diretor of consultancy Grãos da Terra.

The current storage capacity of grains in Brazil is 146 million metric trons, while the ideal number is 200 million tons or 120% of the total production. 

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