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Private finance ploughs into Brazilian agriculture

Cotton harvest / cotton harvest
Photo: Getty Images

Brazil’s agribusiness sector is booming on the back of sky-high commodity prices. The public banks that have long financed the sector now face a wave of new private-sector competitors.

“Not many years ago, when a farmer faced a problem, he could sell his pick-up truck and that would solve his problem. But, as the money that’s involved in production has gone through the roof, if there’s a cash flow shortfall, the sale of a pick-up isn’t going to bridge the financing gap. It could be R$2 million, R$10 million – R$20 million.”

Itaú BBA's director of agribusiness, Pedro Fernandes, makes a reasonable point about increased scale in Brazil’s booming farming industry. Where once a pick-up truck was a large nominal expenditure for a farmer, today a cotton harvester costs around R$6.9 million ($1.3 million). Genetically-modified seeds cost huge multiples of those that were planted a decade ago – offering much higher and more resilient yields but adding to the jump in costs which have risen along with revenues.

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Rob Dwyer head.jpg
Latin America editor
Rob Dwyer is Latin America editor. He has been a financial journalist since 1997 and has worked in London, New York and São Paulo, Brazil, where he is now based.