Brazil keeps producing more food, but some farmers appear to have discovered that withholding debt payments can be more rewarding than honoring their obligations. The country’s 2025/26 grain harvest is expected to reach 361.7 million metric tons, up 2.6%, according to national crop agency Conab. Soybean production is set to hit a record 180.4 million tons, with yields rising 2.5%. Corn output is projected at 144 million tons, with first-crop yields increasing 8.8%, while cotton production is also reaching record levels. Not every crop is expanding, and record harvests do not necessarily translate into record profits. Still, the contrast is striking.
The delinquency rate on Banco do Brasil’s agricultural loan portfolio reached 6.92%, while the state-controlled lender’s adjusted net profit plunged 66.5% in the third quarter. Chief Executive Tarciana Medeiros accused some medium-sized and large farmers of refusing to repay their debts, negotiate repayment terms or provide additional collateral, even after record harvests. She described the behavior as deliberate moral hazard. Such allegations require evidence on a borrower-by-borrower basis, but they raise a question Brazil has long avoided confronting: when a farmer chooses not to repay, why should the financial system continue offering that borrower more favorable, subsidized terms?
The issue becomes even more uncomfortable when measured against the scale of Brazil’s agricultural financing system. The government’s 2026/27 Plano Safra, its annual farm credit program, provides for R$525.1 billion ($95 billion) in financing for commercial agriculture and another R$85.2 billion for family farming, bringing the total to more than R$610 billion ($110 billion). This is not equivalent to a direct Treasury expenditure, but rather an extensive credit framework, part of which is supported by interest-rate subsidies and other public mechanisms. Brazil endlessly debates fiscal deficits, spending limits and public debt sustainability, yet successive governments repeatedly find room for another round of agricultural debt restructuring. The latest example came on Wednesday, November 11, when the Senate approved Provisional Measure 1,376/2026, expanding refinancing conditions for farmers affected by crop losses and sending the legislation to the president for approval.
None of this happens without political influence. Brazil’s Agricultural Parliamentary Front, known by its Portuguese acronym FPA, is one of the most organized congressional caucuses, bringing together 299 members of the lower house and 48 senators in the current legislature. It has the political weight to negotiate directly with the executive branch, reshape legislation and press for more favorable conditions for the agricultural sector. Farm debt has been on that agenda for decades. In 1995, Law 9,138 introduced a broad securitization program for agricultural liabilities. Three years later came the Special Asset Restructuring Program, known as Pesa, targeting larger debts.
Since then, governments across the political spectrum have repeatedly resorted to maturity extensions, refinancing arrangements and extraordinary relief measures. The result is a potentially dangerous incentive: if borrowers believe Congress and the government will eventually deliver lower interest rates, longer repayment periods or additional grace periods, waiting may become more attractive than paying. Banco do Brasil itself says it has identified customers who rejected existing restructuring offers in anticipation of more generous terms. This is an economic incentive problem reinforced by politics.
Brazil’s tradition of protecting certain agricultural interests goes back much further. In the 1930s, amid the collapse in commodity prices triggered by the Great Depression, President Getúlio Vargas authorized the government to purchase and destroy surplus coffee stocks to support prices. In 1931, his administration launched a program to eliminate millions of bags of coffee, mobilizing public resources and revenues from the coffee industry itself to finance the intervention.
The circumstances were different: Brazil’s economy depended heavily on coffee exports, and the policy was also intended to prevent an even deeper economic depression. Yet the historical precedent illustrates an enduring national question: how should the costs of agricultural crises be shared among producers, lenders and society? Nearly a century later, Brazil no longer depends on a single crop. It has become a global powerhouse in soybeans, corn, meat and cotton, developed world-class tropical agricultural technology and built internationally competitive agribusiness companies. But the modernization of agricultural production has not been matched by an equally profound change in the country’s culture of renegotiating farm debt.
Stricter enforcement is necessary. Debts should be collected, collateral enforced where legally appropriate, subsidies subjected to greater transparency, and deliberate nonpayment prevented from becoming a route to cheaper financing. But two distinctions are essential. The first is between borrowers accused of exploiting the system and Brazil’s major agribusiness corporations, many of which are professionally managed, financially disciplined and capable of competing without recurring bailouts. The second, even more important, is between those borrowers and family farmers, who face structural financing constraints and play a vital role in domestic food production.
Nor should Banco do Brasil be automatically absolved of responsibility. The bank itself is responsible for assessing credit risks, evaluating collateral and determining borrowers’ repayment capacity. The Plano Safra serves legitimate economic and social purposes, but that does not place it beyond scrutiny. It must distinguish financing that supports production from protection against private business decisions, genuine climate-related losses from opportunistic behavior, and strategic agricultural lending from recurring privileges. Brazil must abandon the notion that generating wealth entitles anyone to a permanent right to shift their losses onto others.
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