Rural insurance will be decisive for agribusiness in 2024
With El Niño, the sector will need robust support in the face of serious risks caused by adverse weather conditions
Globo Rural – November 28, 2023
Agribusiness operates as an open-air industry. A sequence of routines follows, from soil preparation to harvesting, and, in each of these stages, a series of risks present themselves. At this time, with droughts in the North and excessive rains in the South, climate-related problems are becoming very evident. The presence of the El Niño climate phenomenon, evident over the last few months, helps to explain the current phenomena and presents a scenario of instability for 2024.
“We have observed rains and droughts, as well as wide-ranging frosts. In a situation of crop loss, producers generally lose two harvests before returning to activity. They need to resort to bank refinancing or end up selling part of their assets”, explains Joaquim Francisco Cesar Neto, president of the Rural Insurance Commission of the National Federation of General Insurance (Fenseg).
A traditional way to support producers in these cases is rural insurance, as the Rural Insurance Premium Subsidy Program (PSR) is known. This is a subsidy so that the insurance segment can offer the best conditions to the largest possible number of producers in the agricultural sector. “Rural insurance is extremely necessary, even more so in a scenario in which many producers were unable to plant the summer crop due to the drought or planted it and lost it to the rains”, assesses federal deputy Sérgio Souza (MDB-PR).
In other words, the greater the subsidy, the greater the protection. And that is why, since the first months of 2023, the Confederation of Agriculture and Livestock of Brazil (CNA) has requested an increase in the amount made available to the sector, which is faced with the prospect of recording a record harvest in production since the effort is not compromised by difficulties caused by climate problems.
“The country runs the risk of having problems in the production of soybeans and off-season corn, all due to the delay in planting the oilseed, which will push the sowing windows forward. With changes in average temperature and precipitation rates, crops are the main ones affected”, details José Mario Schreiner, vice-president of CNA.
Still in April, the CNA proposed the approval of an additional R$1 billion to the PSR, to be included in the Agricultural and Livestock Plan 2023/2024. The sector requested that the minimum necessary to support rural producers at this time was R$2 billion and recommended the additional amount to reach the allocation of R$3 billion in the 2024 Annual Budget Law. None of this happened.
Senator Tereza Cristina, former Minister of Agriculture, managed to approve in the 2024 LDO an amendment to guarantee a budget line for rural insurance, within the Catastrophe Fund. “What we are seeing happening today in the country is a sequence of catastrophes: floods in the South, drought in the North. The Catastrophe Fund will help rural insurance to have resources. That’s what we hope”, says the senator.
Impact on society
“If insurance is not accessed in time, the producer needs to look for alternatives. And it has been recurring, in recent years, that the difficulty in defining subsidy values in a timely manner compromises access to this very important service”, points out Neto. As a result, the total area protected by insurance plans has decreased drastically in recent years.
“Since 2021, access to rural insurance has been falling enormously”, declares Souza. “What was included in the Budget for 2023 was half of what we had requested as necessary for minimum coverage. However, in addition to investing half, the government reallocated a large part of the rural insurance to cover other situations. And now comes a proposal for the 2024 Budget in the same size as 2023”, he says.
The negative impact of this phenomenon extends beyond the field, as Schreiner points out. “The real consequences of a lack of investment in protecting producers against climate adversities include compromised harvests and threatened sources of income. Furthermore, the lack of incentives for risk management has broader implications, including reduced food security, instability in the agricultural sector, disincentive to investment in improvements in production and technology, and challenges for the financial sector”, adds the vice-president from CNA.
The ideal path, highlights Neto, would be to define a fixed percentage of the Safra Plan for insurance subsidies. “The subsidy amounts have not met the sector’s demand, but the resource not arriving on time is even more serious. Fenseg requests that the ISR be classified as an official credit operation, which would provide greater security for insurers and producers.”
While continuing to look for solutions to this problem,