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Brazil Farmers Missing out on Recovery in Commodity Prices

June 21, 2016 at 17:34 by Andrew Moran

Brazil is currently facing the worst recession since 1901. Amid its economic contraction, Brazil is undergoing the worst credit crunch since the 1990s. This is causing the nation’s indebted farmers to reduce their investments and miss out on a recovery in international commodity prices.

Over the last few months, financial institutions have tightened their credit lending practices due to an array of bankruptcies and defaults that have transpired this year. The country’s lending growth hit a 17-year low in April, and the lack of lending is expected to remain for at least another year.

Coffee farmers, sugar mills, and grain producers took on too much debt in the last decade to fund their immense expansion. With the paucity of investment, commodity production levels and exports are dropping. This is frustrating Brazil’s commodity industry because prices have finally started to recover on the global market.

The nation’s coffee exports have declined during the first five months of 2016. Coffee farmers have been replenishing their stocks as two years of drought impacted production levels. Soybean and corn production tumbled this year for the first time since 2011. Analysts project that corn and soybean exports will decline until June 2017.

This year, global commodity prices have been gradually rising after bottoming out in March. Coffee prices are nearing one-year highs with September robusta coffee futures trading at $1,674 per tonne on Tuesday at 17:18 GMT. Sugar prices are approaching three-year highs with August white sugar futures trading at $536 per tonne. Soybean prices have reached a two-year high as July soybeans settled at $11.32 per bushel.

Brazil is presently the world’s top exporter for sugar, coffee, and soybeans, and the second-biggest corn exporter.

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