Banks raise rates in loans to agriculture
Even with benchmark interest rate Selic at an all-time low, banks have been claiming higher risk to raise rates on loans to the food industry amid the covid-19 pandemic.
This situation has intensified since mid-April, final stretch of the current crop harvest, which ends this month, and the market already charges rates of as much as 10% for non-earmarked farm loans, compared to 6.5% in the beginning of the season.
This has been affecting big farmers, food processors, cooperatives and farm companies, since small and medium-sized farmers are in a way protected by credit lines of the Crop Plan, whose interest rates are set by the government.
Banks don't openly admit, and in some cases even deny, the recent rise of rates to agribusiness. Yet ten sources, including bank executives, farmers, leaders of entities, trading companies, market analysts, credit specialists and government officials confirm to Valor that rate hikes already are a reality. And they unanimously credit the rise to the wave of risk aversion generated by the crisis, which has already begun to raise delinquency rates in the sector.
The Brazilian Federation of Banks (Febraban) stated that the Central Bank's data on hiring rural credit by legal entities in April still pointed to a drop of 2.5 percentage points in average interest rates compared to the same month in 2019, to 6.1% per year. But the account also takes into account controlled interest rates, which did not rise - and the upward movement only strengthened in the middle of that month. There are no official data on average interest rates in May and June.
"Despite the low Selic and the time being good for commodities like soy and corn, with the escalation of the crisis some farmers already pose higher risk," says one banker who works with farm credit. This source says that the higher risk for lenders is more concentrated on agribusiness segments such as ethanol, milk, fisheries, produce and flowers, which felt the crisis blow more strongly.
However, some growers of commodities including soybean, corn and coffee are beginning to have delinquency problems. "When the pandemic began, banks hit on the brakes and locked access to credit, but right after I'd say a large portion of them increased interest rates for credit to agribusiness, which is showing positive results amid the crisis," says consultant Ademiro Vian, a former director of the Brazilian Federation of Banks (Febraban).
Mr. Vian says that non-earmarked farm credit...
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