The current interest rate of 14.50% maintained by the Brazilian Central Bank is ruining the agricultural production chain.

15% ??

Running a business is already fairly tight at 6 to 12% interest rate range. Running at above 12% is to terminate enterprise activity entirely.

Economicwise, there is no future for economic activity in the country (at least at these rates). Climatewise, there's talk that an El Niño - very strong El Niño - is brewing in the Pacific Ocean.

Credit

Subsidized credit lines are very scarce. Most of the farms I consult for do not get access to them. And I dare to say that these farmers paint a fair enough representation of the average farmer of Brazil (small to medium farmlands)

There is too much talking, speaking, marketing, around these subsidized programs, but the clear picture, if these subsidized credit lines are being used, is that the credit is made available for the banks, which widen their profit margins while keeping the final interest to farmers much the same. Anything above 12% is terminal to farmer's activity. We see a lot of credit-taking to pay up terrible interest rates of 16 ~ 20% in exchange for 11 ~ 16% new loans. And when the bill is due in the next harvest, there is no cash enough to pay it AND keep the agricultural activity. Farmers are being forced to the corner of choosing whether to pay the bank or to plant crops on their fields. If you pay the bill, you are square with the bank - and have no crops left for the time when the next bill comes (the next harvest season).

This is not sustainable. And this will break Brazilian agriculture.

In fact, not only agriculture, but doing business in the country entirely. To keep up with these terminal interest rates, service costs have ramped up too.

And since the produce of farms - agriculturewise - is a commodity, farmers do not have the option to simply charge more for their production.

Farmers are price takers, not price makers

One might think that, since there are lots and lots of famers, and they are somewhat united, that they can unite and decide on the price of their produce. For commodity products, that's not the case. Niche products, organics, local cultural food, yes, price making is how local farmers make their living. The same can be said for services. And we've seen niche products AND services costing more - and more everyday.

This is not the case with industrial farming - the ones who bring food in volume and metric ton to all corners of the world. They are price takers. They have no say on the price their product is being traded at.

e.g. whereas the bushels - of soybean and corn, respectively - are trading at + 12% and 0.8%, for Brazilian farmers this scenario gets worse, because of exchange rates. Their dollars were worth 12 ~ 13% more one year ago. But the costs of farming supplies have not followed this downtrend. Instead they kept their price, or worst, increased in cost. Oilwise we're up +$40.00 a barrel since May 23rd from last year. Urea, + 125%, MAP + 40%, KCL + 45% for the same period.

There is no breathing room. Instead, there is choking of agricultural activity.

Some farmers have decided simply not to plant their previously sown areas

Reducing, thus, crop area, pairing this + high interest rates + future climate events (El Niño), the road is paved for disaster.

For third-world economies, dollar influx is important

This is yet another failure point for the Brazilian economy. Agricultural exports are the main actors that bring dollars to the table.

No dollars, no leverage, destroying the delicate balance and throwing gas into the fire that is this government's attempts to tighten capital control laws.

Judicial recovery spike

So as to avoid the public auctioning of property. I forgot to mention that in order to get agricultural credit, farmers have to offer their farmlands in order to secure the debt. There is no more harvest-produce securing farmer's debt. Only property. This already diagnose the current situation as an extremely delicate one: you have to stake everything you have in order to work in this high risk endeavour: economic and climatewise. And these credit institutions are only loaning on these conditions because - 1: it's now widely allowed and adopted practice; 2: wicked and poor economic / government decisions led to this point. Brazil has had 20 + years of state-bureaucratic-socialist-kleptocratic governments that are very common in Latin America, and the current scenario would not be possible without this terrible combo.