Brazil allocates $12bn to close grain storage void

Brazil fired the starting gun on a dash to close its huge shortfall in crop storage as it unveiled a $64bn support for agriculture, and hopes for a further rise in its grains harvest next year.

The government said it was allocating R$25bn ($11.8bn) towards supportive private grain storage facilities, to help fill a void in capacity which Conab, the official crop bureau, estimates at 39m tonnes, on a harvest of 184.2m tonnes expected for this year.

Some private commentators believe the figure is even higher, equivalent to some 40% of production.

The storage deficit stood only to get bigger next year, for which Antonio Andrade, the agriculture minister, forecast a 190m-tonne harvest.

Side effects

Besides forcing farmers to store some crop on the ground, with a high risk of losses, the shortfall in on-farm storage capacity has been blamed for worsening the strain on Brazil's transport infrastructure, by forcing a scramble to dump at elevators, railheads and ports.

Furthermore, the dearth of storage capacity, in denying farmers a choice of when to sell crop, reduces profitability potential.

"The fact that we do not have storage, means Brazil does not exploit the good times for prices on international market," Jose Augusto de Castro, the president of Brazil's Foreign Trade Association, said.

The government said that the move would also boost Brazil's efforts to control inflation, in reducing the impact on food prices of surges and falls in crop supplies.

'Significant saving for farmers'

The support programme for farm storage, which will be spread over five years, will be backed by loans priced with a low interest rate, of 3.5%, compared to commercial loans priced at some 12%, and to be paid off over 15 years.

The government also revealed R$500m ($235m) in support for Conab's own storage, with the plan to double its capacity.

The moves were part of a R$135bn ($63.7bn) harvest plan which also unveiled R$97.6m in loans for supporting crop production and marketing.

Loan rates will vary from 3.5% for equipment purchases, for which there will be R$6bn of credit, to 5.5% for production.

"These low interest rates represent a significant saving for Brazilian producers, especially since they are lower than the Brazil rate of inflation of 6-7%," Michael Cordonnier at Soybean and Corn Advisor said.

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