May 7, 2018 / 1:35 PM / a year ago

Brazil soy boom spells bumper year for agricultural equipment

RIBEIRÃO PRETO, Brazil (Reuters) - Agricultural equipment makers in Brazil are banking on strong sales this year, boosted by a second straight bumper soy crop and rising grain prices, which will more than offset weakness in the sugar cane sector, they said at a major trade show.

General view of the Agrishow agricultural equipment exposition in Ribeirao Preto, Brazil April 30, 2018. Picture taken April 30, 2018. REUTERS/Marcelo Rodrigues Teixeira

Some machinery producers are forecasting sales growth as high as 8 percent in 2018 as farmers’ confidence rises and record-low interest rates encourage them to borrow and invest.

“In the end, it all comes down to (the price of) soybeans. If that is good, the farmer will decide to buy,” said Rodrigo Bonato, Latin America sales director for machinery maker Deere & Co, during an interview last week at Agrishow, Brazil’s biggest agribusiness expo.

He said after Brazil’s past two soy crops set all-time records, farmers were likely to boost investment and improve efficiency. Deere invested half a billion dollars over the past decade in Brazil, where it sees sales growing 5 percent in 2018.

Although Brazil’s farm sector was a rare bright spot in the deep recession of the past few years, the downturn still appears to have weighed on sentiment among producers, making the economy’s gradual recovery a spark for some investments.

IC Agro, a farmer confidence index tracked by industry group Fiesp, hit a more than four-year high in the first quarter.

“Even though the agricultural sector didn’t suffer much during the recession, farmers held back investments,” said Fernando Gonçalves, chief executive at Jacto, a Brazilian producer of crop sprayers and other equipment. “But look at their confidence now. It is back,” he said, forecasting sales growth at Jacto of between 5 percent and 8 percent in 2018.

That is as much as twice the 3.7 percent growth forecast for farm machinery sales issued by vehicle maker group Anfavea.

Borrowing is also getting easier as low inflation has allowed the central bank to cut its benchmark interest rate to an all-time low, with another cut expected in May.

Banco Santander Brasil SA was offering 1 billion reais of preapproved lines at Agrishow to finance equipment sales as it pushes into a sector traditionally dominated by state-controlled Banco do Brasil SA.

Santander Brasil has opened 16 dedicated farm lending locations in grain producing states such as Mato Grosso and Goiás since last year and hired 60 agronomists for its commercial operation.

“You have to speak the farmers’ language,” said Paulo Cesar Bertolane, a Santander product supervisor.

The major exception to the good cheer at Agrishow was in the cane sector, where sales have stalled as sugar prices hover near the lowest levels since late 2015 and mills put off investments.

Marco Antônio Gobesso, sales manager for cane machinery for the Brazilian unit of Agco Corp, said sales fell last year and were down 20 percent in the first four months of the year compared with the same period of 2017.

Agco has responded by cutting production capacity for cane products at its plant in Ribeirão Preto and opening a line in January dedicated to making sprayers for grain crops.

Reporting by Marcelo Teixeira; editing by Jonathan Oatis

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