Agribusiness operations: modernization of rural producer governance

The contract is the present act of apprehension of the future. In other words, it is the way found by the parties to organize the relationship and predict, regulate, resolve or encourage future behaviors and reactions resulting from the agreement itself. In the field, legal concerns remain equally relevant and must be paramount in rural producers' negotiations, regardless of the volume and quantity of operations.

With the intrinsic purpose of regulating practical problems relating especially to the object of the agreement desired by the parties, contracts require interpretations. This means that, assuming that no one contracts just to contract, the instrument must have a clear purpose. The agreement between the parties must attribute relevance to the context and analyze their conduct and intentions, the facts and evidence and even the silence of each contracting party.

As the foundation of the agreement is private autonomy, interpretation must always be oriented towards solving real problems. Hence the anguish and insecurity of submitting a demand arising from a typical agribusiness relationship to the analysis of any professional or to the judgment of any judge, even in less complex realities than those experienced by large producers.

It is necessary to give the producer the exact dimensions of their measurements. It is not uncommon to come across families that have been earning their livelihood from the countryside for generations. And, in this scenario, we are not talking in terms of subsistence or family farming, on the contrary: they are owners with experience in agribusiness governance, with extensive strips of land, who employ dozens of people directly and indirectly and who move several million reais between purchases of seeds and agricultural pesticides, acquisition or rental of machinery, contracting long-term financing and sale of the final product - all operations are sewn together by contracts.

Throughout harvests, rainy seasons and droughts, rural operations, which were once simpler and more commonplace, began to structure themselves and take on new formats. The volume of transactions increases and, before you know it, the collapse is going hand in hand. This is when rural activity must be conceived as a company, and this, in turn, as an economic agent that only exists through contractual relationships.

The contract that mobilizes the wealth of the countryside is still, in many cases, that model adapted in a hurry, because on the day of signing it was already time to plant or it was carried out verbally. Therefore, it is absent from any written and signed legal regulation. This is not about undermining the trust that emanates from the close relationships between tenants, sharecroppers, or even former commercial partners, but rather about situating the reality of farms in the systemic view of the economy.

The time has come to provide professionalism to agribusiness relationships that have not yet done so, otherwise they will certainly be harmed by those who have already modernized their governance. Contractual instruments and other planning that rely on the expertise of specialized lawyers improve the links in the process of organizing the agro-industrial system and mitigate the risks already inherent to the activity (such as bad weather, pests and diseases), the market (such as variation in the prices of commodities, exchange rate inconsistency and changes in criteria for credit availability) and regulation of the activity – sometimes even internationally (such as the institution of phytosanitary barriers for circumstantial reasons and changes in the taxation of services and products resulting from targeted public policies).

Therefore, relationships before the gate and after it have to be thought out by experts. Coordinating the wide range of activities assigned to rural producers and honoring obligations formally assumed or based on cooperation agreements, agreed verbally, require more than knowing about the theory of private contracts.

Legal advice is even more important in two other situations. The first is inevitable for rural producers who operate as small people in relationships with large partners, such as mills, banks or multinational traders. It is common for a hierarchical relationship to be established between the parties, which leaves the producer helpless and hostage to the conditions imposed by the company or financial institution. It is common for abusive terms to be proposed, often prohibited by law, or disguised operations and tied sales that, in reality, undermine the operational surplus of the activity and can lead the business to collapse.

The need for specialized legal support is more evident when the contract is no longer discussed only by the contracting parties and goes beyond the scope of the farms to be submitted for analysis by a judge, who knows nothing about the relationship of trust that once came into force between the parties. We then talk about the second important situation that could be avoided with the advice of specialized lawyers. Faced with a poorly prepared and adapted agreement – ​​simply standard, or even non-existent in written form – the judge, in attributing his integrative function, will be responsible for “saying the law” that will prevail between the parties.

É This is why defenses or filing of actions of an agri-business nature are delicate, because operations are generally linked to each other and the breaking of any of the links that contribute to the success of the harvest can generate cascading losses, making it unfeasible to continue the activity in the years subsequent profit.

If the maintenance of agricultural or livestock activity is unsustainable, considering the high cost of the operation, the dilution of profits and the fact that the sector is not favored by the weather and market decline, consider the moment to think about even more structured solutions, such as judicial recovery of rural producer.

From another perspective, the absence of specialized consultancy can mean that the wrong choice of contractual modality costs the parties dearly, even in tax terms (the well-known question: lease or partnership?).

Given all this context, it is worth hiring quality legal advice in the next harvest to resolve the risks of the business itself, establish relationships through contracts that capture the real needs and obligations of each party and establish a more modern and consistent form of governance. with the market.