Rural credit shrinks 26% in one year, raising alarms in the agricultural sector.

Financing for agricultural production in Brazil shrank by 25,8% in 12 months, according to a technical note released this Thursday (September 10th) by the Rio Grande do Sul State Agriculture Federation (Farsul). The area financed with rural credit fell from 34,2 million hectares in July 2025 to 25,4 million in July 2026, according to data from the Central Bank.

The survey indicates that the contraction is not yet reflected in the most closely watched economic indicators, such as agribusiness GDP, the trade balance, and food inflation, all of which are currently in a favorable situation. The reason is a lag in the agricultural calendar. Current figures reflect crops planted and financed before the most recent worsening of the credit crisis. Farsul assesses that the effects of the drop in financing should become apparent from the 2026/27 harvest onwards, with planting beginning between September and November.

In Rio Grande do Sul, the drop was even greater, with a 29,3% decrease in the financed area, above the national average. The amount released to the state fell by 18,3%, to R$ 23,1 billion, and the number of contracts dropped by 16,4%, to 189.655. Agriculture in Rio Grande do Sul is the most exposed to the crisis because it concentrates financing in products that have registered the sharpest declines in the country: wheat (-44,1% in the nationally financed area) and rice (-34,7%). In the state, wheat lost 52% of its financed area, and soybeans, the main crop, fell by 35,2%, much more than the national average for the oilseed (-25,8%).

Most stressed wallet

One of the factors behind the contraction is the deterioration of the rural credit portfolio. The share of operations in arrears, default, extension, or renegotiation more than doubled in two years. In Brazil, it went from 11,8% in July 2024 to 23,5% in July 2026. In Rio Grande do Sul, the situation is more serious, rising from 28,6% to 41,3% in the same period, equivalent to almost half of the state's entire portfolio. Farsul associates the worsening situation in the region with the floods of April and May 2024, which compromised the payment capacity of producers in Rio Grande do Sul.

The Selic rate at 14% per year also weighs heavily. Even after occasional cuts throughout 2026, the basic interest rate remains historically high and makes credit more expensive in the Plano Safra lines, whose operating rates are around 14% per year, compared to a range of 7% to 11,5% in previous cycles of lower interest rates. As part of rural credit is subsidized by the government at equalized rates, the high Selic rate also reduces the fiscal space to contain the cost of official financing.

Added to this is a third factor, of a regulatory nature. Resolution CMN 4.966, in effect since January 2025, brought Brazilian bank provisioning rules closer to the international accounting standard IFRS 9. The new rule obliges banks to make prospective risk projections, and not just look at past delays, which tends to increase caution in granting credit precisely in portfolios and regions that are already more stressed, as is currently the case with rural credit.

Capital markets are growing, but not making up for the losses.

Private financing instruments for agribusiness continue to expand and are partially filling the gap left by banks. The stock of Rural Product Certificates (CPRs), currently the country's main rural credit instrument, totaled R$ 576,4 billion in June 2026, a 12% increase in 12 months. Agribusiness Receivables Certificates (CRAs) and Fiagro funds also grew, 9% and 81% in two years, respectively.

However, the technical note points out that these instruments do not fully replace traditional bank credit. The volume of CPRs issued in the 2025/26 harvest itself totaled R$ 377,8 billion, 8% below the peak of the previous harvest, indicating that even the main private mechanism has lost momentum. Furthermore, tools such as CRA and Fiagro require scale and access to the capital market, which favors larger producers and agribusinesses. For small producers, historically more dependent on banks and the Plano Safra (agricultural credit program), the alternative is more limited.

Risks ahead

Agribusiness remains one of the pillars of the country's economic performance. The GDP of agriculture grew 2,8% in the second quarter of 2026 compared to the first, according to IBGE, well above industry (0,1%) and services (0,2%), sectors that together account for more than 90% of the Brazilian economy, but grew little during the period. Without the boost from agriculture, according to Farsul's Chief Economist, Antonio da Luz, the country "would have grown very close to zero, or perhaps even zero."

The sector also sustains Brazil's trade surplus, which totaled US$55,3 billion between January and August 2026, the second-best result in the historical series that began in 1989. And it contributes, on the consumer's table, to the current food deflation: the IPCA-15 for August registered a drop of 0,57% in the Food and Beverages group, driven by items such as tomatoes (-27,4%) and potatoes (-25,1%).

According to Farsul, this favorable scenario is the result of planting and financing decisions made in previous cycles, when the financed area was still larger, and therefore fragile. If the credit contraction continues at the pace observed in the last year, the result tends to appear with a lag. We will have less planted area and lower productivity in the 2026/27 harvest, which could put pressure on the agricultural GDP, reduce the volume available for export, weaken the trade surplus (precisely when the dollar is already trading higher, between R$ 5,15 and R$ 5,20, pressured by the start of the election period) and reverse the current relief in food prices, which weighs proportionally more on the budget of lower-income families.

The organization recommends observing two indicators in the coming months: the volume of credit actually contracted at the beginning of the 2026/27 harvest, between September and November, and whether the current food deflation, currently concentrated in a few items, will be sustained over the period.