Isaura Daniel
São Paulo – The rural credit supplied by the federal government of Brazil is no longer seen by Brazilian farmers as the only source of financing for production and trade. Brazilian agricultural companies are discovering new market sources of funds, such as the stock exchange and agricultural papers.
In around thirty days, an apple producer and exporter from the state of Santa Catarina, Renar, should be entering the stock market, where they intend to collect approximately US$ 6 million with the sale of 10 million ordinary shares. The company is only awaiting the liberation and issue of the papers to start trading. Registration of the company on the capital market was allowed by the Securities and Exchange Commission of Brazil (CVM), at the end of December.
Renar intends to use half of the funds collected on the capital market as working capital to increase exports and the other half for investment in machinery, installations and logistics. The Investor Relations director at Renar, Elvito Coldebella, is confident in the success of issue and believes that other companies connected to agribusiness may become interested in the capital market after their release.
"I am sure that with this opening, many other companies are going to enter. It is more viable and cheaper to open capital than to borrow money at the banks," stated Coldebella.
The stock markets, according to specialists, may be a good source of financing for agricultural companies in the country. "The capital market was always an excellent channel for primary receipts," stated the investment analyst of Souza Barros brokerage company, Ricardo Tadeu Martins.
Primary markets are those in which a company sells part of its capital on the market and uses the money for investment, such as the construction of new units, or working capital. In the secondary market, the funds go to investors who are selling their shares.
"Going onto the stock market, the company is making its capital more democratic, generating jobs and putting its image on the market. This is advertising at zero cost," stated Martins. Nowadays, among the almost 400 companies listed in the Bovespa, 20 are somehow connected to the agricultural sector. Among them are Café Cacique and Iguaçu Café, both in the coffee sector, Granoleo, of grain and derivatives, Perdigão, Sadia and Seara, which produce meats, and Vigor, dairy products. According to Martins, Sadia and Perdigão are the companies with greatest representation together with investors. Iguaçu, according to Martins, is sought due to the good dividends it offers.
For payment at harvest time
Apart from the stock exchange, agricultural papers are also materialising as a good financing option for agricultural companies and farmers. Among them is the Agricultural Certificate of Deposit (CDA), with which the farmer sells papers and collects funds with the promise of future delivery of the product. The Ministry of Agriculture, Livestock and Food Supply believes that in the next two years, agricultural paper should generate over US$ 9 billion.
These certificates are, in reality, a compliment to farmer credit and a government attempt to help farmers find money on the market. The volume of credit to farmers in Brazil, according to analysts in the agricultural area, is currently too little. "It is insufficient," stated the analysis director of Brasoja brokerage company, Antônio Sartori. The government has been increasing the volume available, but the harvest has also been growing at high rates.
For the 2004/05 crop, for example, around US$ 10.4 billion (in current figures) for financing and trade, and approximately US$ 4 billion for investment, a total of US$ 14.6 billion. In the last crop, this total was around US$ 10 billion. The grain harvest, however, rose from 38 million tonnes in 1980 to 120 million tonnes last year. This year the crop should total 130 million tonnes, 10 million more than in 2004.
Sartori recalls that the greatest companies in grain trade can also find funds on the foreign market, at low cost. This is not, however, the reality for all farmers. "Nowadays, so as to be able to invest, farmers need to borrow money, use their own funds, collect funds on the market, or exchange fertilizer and seed for products (crops). Producers are doing this more and more," explained the analyst.
Hedge
The presence of Brazilian livestock is more and more apparent on the Brazilian finance market. At the Commodities & Futures Exchange (BM&F), in 2004 a record volume of agricultural contracts was traded. This kind of operation, however, is not used for financing of production or investment, but for the farmer to be able to guarantee, through a contract, a minimum price for this product at harvest time.
Last year, the BM&F moved 1.05 million agricultural contracts, 34.9% growth over 2003. The operations generated US$ 7.85 billion. The increase in funds when compared to the previous year was 67.6%.
