The necessity to provide simplified credit to rural producers as an incentive for the growth of the agribusiness sector led to the creation of the Barter operation in Brazil, through which producers can acquire agricultural inputs in exchange for products, expanding the possibilities of purchase and sale, stimulating market activity.
Simply put, through the Barter Operation, rural producers, in order to acquire the necessary inputs for their production, such as fertilizers, seeds, equipment, and machinery, commit to delivering commodities, i.e., products that they produce, such as soybeans, corn, and coffee, to the input supplier company. Barter, therefore, is a kind of exchange, as its name suggests, but it can involve a complex operation to ensure a certain predictability in gains for both parties through the involvement of a third party: the trading agent or offtaker.
Thus, the Barter operation is formalized through the execution of the so-called Barter Contract, a tripartite contract entered into by: (i) the rural producer in need of inputs for production and better payment terms, (ii) the company, supplier of the inputs, and (iii) an intermediary, referred to as a trading agent or offtaker, crucial for the operation, responsible for receiving the product and selling it in operations in favor of the input supplier, in addition to providing expertise, financial resources, and logistical support.
The instrument holds special importance for ensuring the security of the transaction because it is through its execution that all the guiding elements and conditions of the Barter are disciplined. For example, the Contract will describe what obligations are assumed between the parties and their respective compliance dates, what inputs and their quantities are acquired by the producer, the value or quantity and quality of the commodities owed to the supplier, as applicable, among other elements, as well as stipulating a deadline for the accomplishment of the CPR – Rural Producer Certificate.
It is also important to mention that there are two modalities of Barter, namely, ‘fixed price’ and ‘price to be fixed’. In the former, the quantity of products (in bags or arrobas) necessary for payment of inputs will be defined in advance in the contract, i.e., the transaction value is fixed and, even if there is a variation in the commodity price, the contract will not change, and the producer will deliver the quantity described in the instrument. On the other hand, in the operation of Barter by price to be fixed, the amount due will be set in the contract and the quantity of products will vary according to the fluctuation of the commodity value.
Once the conditions of the Barter operation have been negotiated between the parties involved, the so-called CPR (Rural Producer Certificate) is issued, the document by which the rural producer assumes the obligation to deliver the rural products and, consequently, the enforceability of the transaction, ensuring the obtaining of credit from financial institutions or investors.
The CPR was established by the Brazilian Law No. 8,929/1994 and is a negotiable, liquid, and certain credit instrument, with or without guarantee, which must be registered and can be issued by the rural producer, cooperative, or association of producers. Among its requirements, the main ones can be highlighted: identification of the Rural Product Certificate, delivery date of the products, name of the creditor, promise of delivery of the product, place and conditions of delivery, description of the goods linked as collateral (if applicable), date and place of issuance, and signature of the issuer. The CPR is the instrument that guarantees security to the Barter operation because, as a result of its executive nature, the supplier has the guarantee of receiving the amount due to it as a result of the sale of inputs.
Among the advantages of Barter, it is worth noting that, in addition to simplifying the purchase and sale of inputs for producers, ensuring the possibility of purchase without using financial reserves, prices and interest rates are defined before the harvest, at the time of contract execution, guaranteeing security and predictability for the transaction.
For input suppliers, Barter can provide an increase in sales, as it enables suppliers to receive agricultural products as payment for the inputs, or even the amount in cash, if the sale of commodities is intermediated by trading companies or financial institutions, ensuring the expansion of their customer base, especially among rural producers facing financial constraints.
Barter has revolutionized the agribusiness sector, and in 2022, Brazil’s largest agricultural input distributor announced that it had reached the milestone of one billion reais (BRL 1,000,000,000.00) in Barter contracts, reflecting the current Brazilian scenario and the importance of Barter for expanding business and ensuring growth opportunities for producers of all sizes.