Roberto Tardivo says he'll keep those last 250-or-so acres of soybeans he still grows, but you get the idea their days are numbered. He and his neighbors are switching to sugarcane. The weak dollar combined with high petroleum prices are making sugarcane especially attractive this year.
One firm in Mato Grosso reports fertilizer sales down by about half in June, compared with the same month last year. June is usually a big month for seed and fertilizer buys.
Land values in Mato Grosso's neighboring state of Goiás have dropped 6.4% in the last year and farmers all over Brazil have blocked roads to processors and ports with trucks and tractors, demanding help from the government.
Government help has always been scarce here, coming most often in subsidized interest rates for the purchase of equipment. In a country where the monthly consumer interest rate sounds like a U.S. bank's annual rates, farmers can often get loans at below 6% per annum for the purchase of a combine or tractor. But that has typically been the extent of government assistance to agriculture.
This year, though, the government is buying ag commodities — including soybeans — at a premium. In July, in the state of Tocantins, soybeans sold at $4.83/bu. to individuals, with the government adding about 40¢/bu., based on a mid-July exchange rate. That money, says one manager, will goto clients who financed last year's purchase of inputs with this year's soybeans, thus reducing farmers' debt loads.
Each Brazilian soybean-producing state is allotted a fixed number of bushels that are eligible for the auction, and the government plans to spend about a half billion dollars propping up soybean prices this way.
The government has said it will hold a series of six such auctions before 2007. In the first of that series, about $11.5 million was spent on making up the difference between local quoted prices and the auction target price. Each region or state is allotted a number of metric tons that can be sold at the subsidized price, and typically farmers register with the local processor holding their beans to qualify to participate in the auctions.
In an effort to get money into the hands of more farmers, no single producer is allowed to sell more than 1,000 60-kg. sacks of soybeans (a sack is about 2 bu.) in a given auction, and not more than 6,000 sacks over the course of all the auctions.
The program started with lots of complaints among ag leaders that basis prices set for the auctions were not high enough to cover costs, even with the addition of the premium. But times are tight. And the government is taking it as a good sign that it was able to buy up 75% of its maximum target at this first auction. Another sign that indebted farmers are willing to take what they can get at this point.