Satellite remote sensing reduces risks for granting rural credit

Rural credit has been a fundamental tool for the development of Brazilian agriculture for decades, developing vigorously to meet the demand of the Brazilian agricultural sector. Between 1995 and 2018, the volume of resources officially offered grew an average of 8% per year, jumping from R$30,5 billion in 1995, in updated values, to more than R$182 billion in 2018. Agriculture being an intensive activity in demand for capital - and with production cycles that are often long - producer capitalization is essential to increase their purchasing power, promoting the modernization of production techniques and, ultimately, an increase in productivity in the sector as a whole. Therefore, it is not an exaggeration to say that credit is one of the most important inputs for Brazilian agribusiness.

Even with all this volume of credit offered, the sector demanded even more. A reflection of the natural condition very conducive to high productivity, provided that with the correct investments in fertility, genetics and machinery, Brazilian agribusiness absorbed all this officially available credit and still had an appetite for more. It was with this repressed demand for credit and a clear vision that its supply was a good investment, that a unique movement was formed in Brazil, where other sources of credit developed and are now essential for rural producers. Pesticides, fertilizers, seeds, trading companies, as well as cooperatives and resellers, today play an essential role in supplying credit to Brazilian agribusiness.

Jaqueline Freitas, Head of Sales at Traive Finance, a credit startup based in the USA and Brazil, conducted a pioneering analysis on the dynamics and origin of credit that irrigates the entire Brazilian agribusiness, and came up with very interesting results. “The lack of knowledge of the level of debt and risk, the asymmetry of information and the high risks of guarantees made banks choose not to finance an important segment of producers. This slice was then filled by alternative financiers who today together represent around 50% of the Brazilian financing market,” noted Jaqueline.

By analyzing the ten main crops in Brazil such as soybeans, corn, wheat, sorghum, cotton, coffee, sugar cane, rice, beans and oranges, the work concluded that there is a capital demand of around R$ 169 billion to the 2018/19 harvest. This capital to finance production comes from different sources, with banks representing just over R$70 billion (45,2% of the total), resellers and cooperatives contributing R$29 billion (17,2%), The pesticide industry contributed R$23 billion (13,7%) and trading companies contributed R$16,9 billion (10%). The remainder of the capital required for the 10 main crops of the 2018/19 harvest came from the producer's own pocket, accounting for more than R$23,5 billion, or around 13,9% of the total harvest costs.

“So that all these market players can continue to offer more and more credit at competitive costs and low risks, the tools that allow quantifying these variables become more and more important. The use of remote sensing is one of these tools.”, assesses Jaqueline. Today banks and trading companies adopt this type of technology on a large scale, with significant savings in the risk assessment and harvest monitoring process. With the regulation of the use of these techniques by the Central Bank in 2015, the tendency is for the general credit market to increasingly adopt specialized solutions for monitoring harvests and granting credit at more competitive values ​​and with lower risks.

Geosys, a company that monitors agricultural areas using satellite data, is an ally in this regard. The company has been offering remote sensing solutions for the agricultural credit, insurance, precision agriculture and commodities markets, providing everything from customized services to ready-made solutions and APIs for 30 years.

 “There are more than 200 thousand maps delivered daily through remote sensing work, worldwide, and 20 million hectares of agricultural areas monitored annually.”, explains Pedro Ronzani, business manager at Geosys Brasil. Massive geospatial data analysis tools allow creditors to thoroughly analyze the profile of each property and make better decisions, generating important savings through systematic risk reduction or better equalization of the risk-return relationship of each financial operation. Furthermore, the monitoring of collateral assets (from the land to the crop that is growing on the farm) can be greatly optimized with the use of remote sensing techniques.”, analyzes Pedro Ronzani.

By combining efforts with specialized companies such as Geosys, players in the agricultural credit market are able to focus greater efforts on their main activities and thus manage their creditors in an even more robust manner.

These are solutions that have become possible and popular in recent years with the increase in computer processing capacity, acquisition and processing of satellite and radar images, in addition to the preparation of the agricultural sector for the rapid absorption of these technologies. All of this culminates in the generation of extremely accurate data, providing high-quality analysis and insights that bring value to the entire agricultural credit chain.