Money headaches exist in the Southern Hemisphere, as well. But in Brazil those problems are tied N-O-T to a national debt, but to personal liability.
An analysis released by a Brazilian agricultural consultancy called Agrosecurity shows farmers in the Mato Grosso region are under enough financial stress that soybean planting intentions likely will shrink.
The analysis says farmers have amassed huge debt in recent years through purchases of land and equipment. Further, repayment of the debt has slowed as the Brazilian currency has strengthened against the U.S. dollar. The Brazilian real has risen 28 percent in value against the dollar in the past year alone. That rise has inflated the dollar-linked debt and depressed local crop prices.
According to the analysis, medium-sized farmers will lose about 8.5 percent on their initial investment for the upcoming crop year. That means a reduction in inputs of 11 percent for corn ... and 20 percent for soybeans. Many farmers, the report says, could go out of business.
Mato Grosso is Brazil's top soybean producing state. Many farmers there held old crop in storage in anticipation of a U.S. drought that never materialized. The expected jump in global soybean prices never happened and the result was ample stocks of low-priced Brazilian beans.
The problem is NOT short-term. Sagging land values, reduced yields from bad weather and soy rust, and rising energy costs all have contributed to the rapid expansion woes.