A spate of farmer defaults in Brazil's top grain-producing state is creatin...
SAO PAULO - A spate of farmer defaults in Brazil’s top grain-producing state is creating headaches for global traders who are among their main creditors and posing challenges to the widespread use of barter in the world’s largest soybean exporter.
Still, the cases reveal the risks in Brazil of poor farm management, a weak economy and an ambiguous bankruptcy code, which have spelled trouble for traders despite a soy boom fed by U.S.-China trade tensions. Amaggi said it has fought to seize almost 24,000 tonnes of soybeans from one farmer, Zeca Viana, whose obligations to the trader were among 312 million reais of debt on which he defaulted this year.
If traders keep getting stiffed on contracts of that kind, they warn they will become more stringent about new deals, pinching a key source of credit for farmers in the world’s second-largest soy producer.In Brazil’s longstanding barter system, traders finance farmers’ seeds, fertilizer and other inputs early in the season to guarantee delivery of grains at harvest time.
The default rate on farm loans more than doubled in five years to average 2.8 percent last year, according to Brazil’s central bank, even as defaults in the broader economy fell to a multi-year low.
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