WHITE PLAINS, N.Y. — Bunge S.A., a subsidiary of Bunge Ltd., Banco Santander Brasil S.A. and The Nature Conservancy (TNC) jointly developed financing mechanism for soy producers in the Brazilian Cerrado.
The program is designed to promote agricultural production without further deforestation or conversion of native vegetation, by providing long-term loans to farmers willing to commit to the approach. Most of the loans currently available to soy producers are for less than a year to finance their annual crop costs. This new mechanism will offer loans of up to 10 years, recognizing that investments in land acquisition and preparation have a long-term payback.
“In 2015, Bunge committed to eliminate deforestation from its agricultural supply chains globally, and developing commercially viable incentives for conservation is an important part of our strategy,” said Soren Schroder, chief executive officer, Bunge Ltd. “Bunge’s extensive farmer relationships and established presence in the Brazilian agribusiness sector, as well as expertise in risk management, will be of great benefit in developing and managing a pipeline of investments for the program, and we look forward to working together with TNC and Santander to achieve our goals.”
According to Bunge, soybean production in Brazil nearly tripled between 2001-17. The Cerrado has supported much of this expansion, adding 9.6 million hectares of planted soy during this timeframe, a significant part of which were in areas with native vegetation. Over the next decade, it is estimated that large additional planted areas will be needed in the Cerrado to accommodate forecasted growth.
The new financing mechanism is part of a broader effort by N.G.O.s, companies and banks to meet the growing demand for soybeans in a sustainable way. Last year, Bunge, TNC and other organizations launched Agroideal.org — a planning tool to help the soy sector make better decisions about where to expand production. Traders and consumer goods companies also have made commitments to deforestation-free sourcing, but to date little has been done to create incentives for farmers to expand production on land that has been already cleared.
“Currently there are more than 25 million hectares of already cleared land in the Cerrado suitable for soy expansion,” said Mark Tercek, c.e.o. of TNC. “We believe that introducing long-term financing will provide a real incentive for farmers willing to produce more sustainably and go beyond compliance with environmental laws and regulation. TNC brings its science-based approach to the environmental framework and monitoring for this mechanism. We will also invest our own capital in the project, together with Bunge and Santander Brasil.”
The financing program will be piloted with approximately $50 million and provide loans to individual, family or corporate farmers in eligible locations. The loans are expected to be offered to farmers beginning in September. Once the model is demonstrated to be financially viable and environmentally sound, Bunge, Santander Brasil and TNC intend to scale the program with additional investors and farmers.
“As a financial partner and one of the leading banks for farm credit in Brazil, and with a demonstrated commitment to sustainability, Santander Brasil is uniquely suited to help get the program off the ground and position it well for expansion after the initial pilot phase,” said Sergio Rial, c.e.o. of Santander Brasil and co-chair of the Latin American Conservation Council. “We look forward to playing a game-changing role in sustainable agricultural expansion that benefits farmers and customers while preserving the environment.”