Record indebtedness in agriculture pressures credit and triggers a red signal in the financial sector

The Brazilian agribusiness is undergoing a period of adjustment after years of expansion and high profitability. The combination of high costs, falling commodity prices, and increased indebtedness has raised default rates in the countryside, generating concern throughout the financial chain, from input suppliers to banks. According to Eric Emiliano, partner at L.E.K. Consulting, the current scenario reflects a phase of tighter margins and lower payment capacity on the part of producers. “The agribusiness had very good years, especially in soybean and corn crops, but it has been experiencing tighter margins for two or three harvests. Costs have risen, commodity prices have fallen, and this puts pressure on the producer’s cash flow,” he explained. Eric recalls that leverage is common in agricultural activity, with producers resorting to credit from cooperatives, resellers, trading companies, and banks, but emphasizes that the debt structure has become heavier in the face of lower ...