Brazil farmer defaults burn soy traders betting on barter

SAO PAULO (Reuters) – A spate of farmer defaults in Brazil’s top grain-producing state is creating headaches for global traders who are among their main creditors and posing challenges to the widespread use of barter in the world’s largest soybean exporter. The battles in Mato Grosso bankruptcy courts pit farmers against international trading houses, such as France’s Louis Dreyfus Corp (LDC) and U.S.-based Bunge Ltd, which have been lending aggressively to producers through Brazil’s unique barter system to protect profit margins from newer traders in China. The scale of Brazilian farmer bankruptcies are a far cry from the plight of their U.S. peers, who have struggled recently with extreme weather and a trade war with China. Still, the cases reveal the risks in Brazil of poor farm management, a weak economy and an ambiguous bankruptcy code, which have spelled trouble for traders despite a soy boom fed by U.S.-China trade tensions. Trading firms have been stymied to find that farmers they lent to as individuals are often able to seek bankruptcy protection as if they were corporations – making it harder to recover millions of dollars of soybeans under contract. Judiney de Souza, the chief executive of Amaggi, Brazil’s biggest… continue reading

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Source: CTRM Center

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