According to Serasa Experian<\/strong>, Brazilian rural landowners who act as private individuals accumulated 80 requests for judicial recovery [or judicial reorganization, which is a court-supervised process – similar to Chapter 11 in the USA – that allows insolvent companies to suspend debts and negotiate new terms for them] between January and September 2023, an increase of 300% when compared to 2022. A law amended in December of 2020 made it possible for these farmers to be the only individuals who can resort to the appeal.<\/p>\n Luiz Rabi<\/strong>, senior economist at Serasa Experian<\/p><\/div>\n AgriBrasilis – Why did requests for judicial recovery\/reorganization increase in agribusiness in 2023?<\/strong><\/p>\n Luiz Rabi –<\/strong> The analysis for the entire year of 2023 has not yet been finished. Considering data up to September of 2023, which are what we have available, we cannot say that there was an increase in 2023 compared to 2022 for farmers with a Legal Entity (LE)\/Corporation profile. However, for Private Individual or Natural Person (NP) profile farmers, there was a 300% increase.<\/p>\n Part of the sharp growth in requests for judicial reorganization made by agribusiness NP profiles happened because this was a new mechanism for this public, which ended up adhering to the change in the Law [the change made in 2020 in the Bankruptcy and Judicial Recovery Law]. Even so, Brazilian agricultural production experienced a significant drop in profitability margins during the last two seasons. This was due to production costs that grew at a higher rate than the increase in the income of rural landowners. These costs subsequently decreased, but farmers’ revenues also decreased (with the fall in commodity prices), leaving margins “slimmer” than the average of previous years.<\/p>\n In the 2023\/24 season, we have observed, based on testimonies from input suppliers, that decision-making for purchases and investments is delayed, causing many farmers to review their input packages to reduce costs. There are also climatic effects in some regions that are leading to lower yields. In addition, the commercialization of grains from the last summer and off-season crops (liquidity of the farmer to honor its commitments and release new credit for the next cycle) also presented a more delayed calendar.\u00a0 Finally, there may also be an accumulated effect of the pandemic, which has only now had an impact on some branches of agribusiness.<\/p>\n AgriBrasilis – Which sectors of agribusiness have been the most affected? Which other sectors of the economy showed this trend?<\/strong><\/p>\n Luiz Rabi –<\/strong> Among farmers, it is noted that most of the requests for judicial reorganization were originated by those who have the following sectors involved in their main activities: livestock, soybean, sugarcane and coffee cultivation. The largest share of these farmers are large landowners and those without registration of rural properties (probable land tenants and economic or family groups related to the sector). In terms of regions, for NP profile farmers, the states that submitted the most requests for judicial reorganization were the States of Mato Grosso and Goi\u00e1s, while for LE profile farmers the States were S\u00e3o Paulo, Mato Grosso, Paran\u00e1 and Minas Gerais.<\/p>\n Both farmers who act as individuals (NP) and legal entities (LE) recorded significantly lower credit scores in the Agro Score, even before filing for judicial reorganization. That is, about a year before they filed for judicial reorganization, the Agro Score \u2013 a tool developed by Serasa Experian specifically for the agribusiness credit market<\/a> \u2013\u00a0already pointed to signs of financial deterioration for these profiles. This demonstrates to lenders that it is possible to use predictive models to estimate and protect the granting of credit through better management of the customer portfolio, based on information.<\/p>\n Regarding the general scenario of judicial reorganization requests, we can say that, in 2023, all the main macro sectors of the economy showed significant growth in demand for Judicial Reorganization: trade (88.6%), industry (84.1%) and services (53.5%).<\/p>\n AgriBrasilis \u2013 Regarding non-agribusiness indicators, this is the fourth highest rate of judicial reorganization since 2005. Is this scenario expected to improve in 2024?<\/strong><\/p>\n Luiz Rabi –<\/strong> Still on the general scenario of judicial reorganization requests, our expectation is that, with the continued reduction of inflation and interest rates, we should have, at first, a gradual retraction in the levels of delinquency of both consumers and companies and, in a second moment, probably from the second half of the year, a slowdown in the pace of judicial reorganization requests.<\/p>\n![\"\"](\"https:\/\/agribrasilis.com\/wp-content\/uploads\/2024\/02\/Luiz-Rabi.jpeg\")
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