May 01, 2019

Farm Equipment - Brazil's Moderfrota Program Receives New Funding

By Paula Gobbi
After agricultural equipment credit was suspended for lack of funding, Brazil's Moderfrota program received an additional 500 million reais in funding this week, which supports equipment sales ahead of Brazil's largest farm expo, Agrishow Ribeirao Preto, but is unlikely to cover the industry's overall credit demand.

Brazilian farm equipment dealers and manufacturers got a positive message at the kickoff of Agrishow Ribeirao Preto on Monday morning when Brazil's minister of agriculture announced an additional 500 million reais funding would be available for the Moderfrota credit arm. Two weeks ago, the industry was shocked when BNDES-backed (Brazil's Economic and Social Development Bank) Moderfrota credits were suspended without notice (on April 11) for lack of funding (see OTR Global's April 23 Ag This Week). But talk at the Agrishow is that additional funding is a stop-gap measure to support sales at the event and that the Moderfrota program still remains underfunded for the full level of industry credit demand. In a further move to ease tension, the government also announced that it was moving up the release date to June 12 for the 2019-2020 farm program

The credit dry-up immediately cast doubts about sales and deals in the pipeline for sources at every dealership and subsequently every OEM, including AGCO Corp., CNH Industrial N.V. and Deere & Co. Banco do Brasil S.A. had stepped in with some spot deal credit support, but dealers said it would not be enough to replace the volume of ag credit provided by the BNDES Moderfrota program. Dealers said it was imperative that the government do something to restore credit before Agrishow Ribeirao Preto, which is the largest ag show in Latin America, at which millions of dollars/reais of sales and orders take place. That need was addressed on Monday morning with the government announcement.

OTR Global is attending Agrishow Ribeirao Preto this week in Sao Paulo, Brazil, and plans to publish a note next week summarizing some of the key developments at the event.