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Brazil cotton, cane, grain farms to gain from $65bn splurge

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Brazil is poised to unveil $65bn plans to boost its agriculture through measures including a splurge on grain storage and a minimum price for cotton, although it may be sugar producers which benefit most.

Brazil's farm minister, Antonio Andrade, will on Tuesday reveal Brazil's annual "harvest plan" for 2013-14, which will allocate a sum believed to be R$135bn-140bn ($63.4bn-65.6bn) to support the sector, a rise of some 20% year on year.

The plan is seen increasing the minimum price of cotton, which farm minister Neri Geller said was under review after a sharp drop in sowings in 2012-13, when area of the fibre, on a harvested basis, tumbled by more than one-third as farmers switch to more profitable crops, according to US data.

"Raising the minimum price would be significant for producers," Brazil-based agriculture consultant Kory Melby told

"Getting cotton prices up would free up their cash flows."

Brazil, which this season is set to be overtaken by Australia for third rank in cotton exports, has not raised its minimum price on cotton for a decade, when it was lifted from R$33.90 per 15 kilogrammes to R$44.60 per 15 kilogrammes.

'Woefully low'

The centrepiece of the plan, swallowing a reported R$25bn, is expected to be the release of funds for improving Brazil's storage, whose deficiencies are seen exacerbating the country's problems of poor transport infrastructure.

Mr Andrade said that only 5% of Brazil's grain production is stored on-farm, compared with the figure of 30-60% in other major agricultural countries, according to crop scout Michael Cordonnier.

"I thought it was more like a low-teens percentage. But, whatever, it is woefully low," Dr Cordonnier said.

And without sufficient crop storage space, "everyone needs to transport their grain at the same time which results in long lines of trucks at grain terminals and port facilities and increased costs."

Bureaucratic and financial hurdles

The storage network is further undermined by the dearth of facilities able to store the publicly-owned grain bought by the state under price support programmes, or to help farmers in the drought-hit north east of Brazil, which are also expected to be targeted in Tuesday's plan.

Less than one-quarter of Brazil's 17,500 grain storage facilities are certified by the Conab crop bureau for use of public supplies, with approval of others snarled up by bureaucracy.

The harvest plan is expected to offer low interest loans and credit lines to both private and public borrowers to fund the construction of new facilities, improving for farmers access to funds for investment projects.

"One of the issues is that farmers often rely on big grain traders for cash advances," Dr Cordonnier said.

"It is not in the interests of these grain companies to lend money to improve storage on a farmer's property, when they make money out of storing crop on their own property."

Sugar sweetener

However, it may be sugar cane producers which benefit most from the changes, with the harvest plan believed likely to ease their access to finance for planting cane.

Dr Cordonnier said: "Farmers planting new cane to not get any income for the first year, which is a deterrent to planting," but with productivity of ageing stands progressively decreasing.

"Low interest loans or credit for renewing sugar cane would make it easier for producers. It may be the sugar sector which sees the biggest difference from Tuesday."

That is, if the harvest plan delivers on its promises.

"Brazil can allocate all their want to farming, but it is the quality of that they are offering that counts," Mr Melby said.

"You can't just turn up and get the money. It is a difficult process. It can be a very long time between applying for money and when the cheque arrives."


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