Brazil's next president faces a slowdown in the country's important farm sector within a year of taking office, as weather setbacks and rising costs take hold, Sterne Agee analysts have warned.

The broker flagged the fillips that low-interest financing, favourable weather and high left-over fertilizer stocks have given to Brazil's farmers – the world's top producers of coffee and sugar, and major growers of corn and soybeans too.

"Brazil's agricultural economy has experienced an almost vertical recovery over the past three-to-four quarters," Sterne Agee said in a report.

However, the rising probably of disruption from a La Nina weather pattern, associated with cooler Pacific water temperatures, looked set to usher in weaker yields than those in the bumper 2009-10 crop year.

"Yields in Argentina and the south of Brazil could be lower than expected. Therefore our initial estimate is for flat to down production," the briefing said.

'Inherently cyclical'

Farmers were also set to face higher fertilizer and seed prices, while a slowdown in global economic growth in 2011 would dampen demand for their crops.

Agricultural production looked set for a 10-15% decline, a drop which would be reflected in, for example, sales of farm machinery.

The farm equipment sector, which was currently enjoying strong growth, "remains inherently cyclical" and could start a fall back into decline next year.

Nonetheless, the briefing noted expectations at CNH Global, the maker of Case and New Holland machinery, that a pullback would be "modest… given the strength of fundamentals and likely continuation of finance programmes, albeit at somewhat higher rates".

Brazil has allocated $65bn to its 2010-11 farm subsidy plan which supports interest rates as low as 2.0% for a decade machinery purchases.

Elections loom

The comments come as Brazilian presidential hopefuls are positioning themselves ahead of elections in October, with Dilma Rousseff and Jose Serra currently neck-and-neck in the polls.

Most observers nonetheless believe that Mr Rousseff, the chosen successor of current president Luiz Inacio Lula da Silva, will prevail, Sterne Agee said.

Outside candidates include Marina Silva, a former rubber tapper and environment minister, who is running on the Green Party ticket.