Banco do Brasil cuts farm lending for second straight crop season

Amid tighter conditions for rural lending, Banco do Brasil has reduced the amount of financing available to farmers and the agribusiness value chain for the second consecutive crop season. Facing record farm debt, stricter banking provisioning rules, and an unfavorable climate outlook for the 2026/27 crop, the bank announced on Friday (3) that it will make R$210 billion available through credit lines and financial instruments, down from the R$230 billion offered in the 2025/26 season. El Niño and rising costs discourage wheat sowing in Brazil Strong El Niño raises inflation, fiscal concerns in Brazil The bank had already reduced funding for the sector last season compared with the 2024/25 crop, when it allocated R$260 billion. Actual disbursements have also declined since the 2023/24 season, when R$230 billion was lent. They totaled R$225 billion in 2024/25 and R$209 billion in 2025/26. According to the bank, the current allocation is “appropriate for the current environment” and reflects a broader trend of greater selectivity across the financial sector. The adjustment also takes into account the crop’s climate risk, with forecasts pointing to a strong El Niño, as well as record levels of farm debt and leverage. In an interview last week, before the funding announcement, Banco do Brasil’s vice president for agribusiness and family farming, Gilson Bittencourt, said the bank would remain the country’s largest agricultural lender. “We will continue financing agribusiness. We understand that the sector goes through cycles. At times, farm income improves, while in others it comes under pressure. The important thing is to continue standing by producers, especially those who trust the bank. We will keep financing those producers,” he said. In a statement, Banco do Brasil said the R$210 billion allocation is consistent with the R$209 billion it disbursed to the sector during the 2025/26 crop season. “It is important to note that the amount initially allocated also reflects demand from the sector itself, as producers have become more cautious about taking on new loans, particularly investment financing, given that their margins are narrower than in previous crop cycles,” the bank said. The bank added that farmers are currently “adjusting their cash flow as a result of decisions made and commitments undertaken during a previous cycle of high commodity prices, strong investment expansion when interest rates were lower, extensions of operating credit in previous years, and high land lease costs, all of which have reduced financial margins. We believe producers continue to invest, but in a more strategic, planned, and efficient manner.” It also said that, in response to rising defaults and higher credit risk, it has strengthened its credit assessment models by placing greater emphasis on cash flow, collateral, and producers’ financial track records. Given the tighter financial and operating environment, Banco do Brasil is considering the possibility that its agribusiness loan portfolio could contract in 2026. It expects the portfolio balance to range from a 2% decline to a 2% increase, compared with 9% growth in 2025. In the first quarter of this year, the portfolio expanded 3% to R$418.4 billion. The bank’s delinquency rate for its agribusiness loan portfolio reached a record 6.22% in March, up from 2.76% a year earlier. More than R$26 billion in loans have been overdue for more than 90 days, while R$62.7 billion in installments have been rescheduled. Provisions for potential losses on rural credit totaled R$40.6 billion in the first quarter, tying up capital and weighing on the bank’s balance sheet. Those factors were taken into account when setting funding levels for the 2026/27 crop season. The bank is also monitoring discussions over a possible restructuring of farm debt, whether through Bill 5122/2023, currently under debate in Brazil’s Chamber of Deputies, or through a provisional presidential decree. The amount allocated for financing may also be revised during the 2026/27 crop season. That occurred during the 2025/26 season. Of the R$230 billion initially announced, R$58 billion received Treasury interest-rate subsidies. Because the bank made greater use of funding from other sources, it returned part of those subsidized resources, leading to reallocations that reduced the subsidized portion to R$45.3 billion. As a result, the total amount available fell to R$217.3 billion. “Banco do Brasil has agribusiness in its DNA and, alongside producers, contributes directly to technological and social progress in rural areas, job creation, and global food security. We are proud to be the leading partner of Brazilian agribusiness, both in prosperous crop seasons and, above all, during the most challenging cycles,” Banco do Brasil CEO Tarciana Medeiros said in a statement on Friday.