Spain’s Santander Expands Agriculture Business With Brazil Bet

(Bloomberg) -- Banco Santander SA is expanding its agriculture business in Brazil as the world’s largest soybean, sugar and coffee producer continues to increase output and solidify its position as a crops powerhouse.

The Spanish bank’s local unit has expanded its commodity risk desk to deal in 20 agriculture products, up from four a year ago, said Luiz Masagao, treasury director at Santander Brasil SA. The company is also taking more risk and wants to boost its share of commodity trade finance for local and international companies with an agriculture business in Brazil.

The moves comes as commodities are hot again, with prices of corn, soybeans and wheat rallying to multi-year highs. Even the beleaguered sugar market has improved. It also follow the exit of some international players from the trade finance space, with the likes of ABN Amro NV, BNP Paribas and Societe Generale SA pulling out of the sector or scaling back.

“Agriculture is where Brazil has competitive advantage, where we see the GDP will grow,” Masagao said in an interview.

The expansion of the bank’s derivatives desk in Brazil is part of a broader global strategy to focus on the South American nation as the main driver for agriculture growth. The bank is also increasing its risk exposure by offering over-the-counter tailor-made hedges, instead of just acting as an intermediate between clients and commodity futures exchanges, Masagao said.

“We will bring hedge’s risk to our balance sheet in order to offer customized solutions,” he said.

Santander is also looking to increase trade finance to clients operating in Brazil’s agriculture sector. That business expanded 30% last year despite the pandemic and further growth is expected for 2021, said Caroline Perestrelo, an agribusiness corporate commercial superintendent at Santander Brasil. The bank also sees opportunities as others pull out of the sector.

“It has opened more opportunities for us,” she said in the same interview. “We’ve gotten calls from clients which have been left by our competitors. We are working to conquer part of this business.”

The optimistic fundamentals for agriculture commodities combined with the Brazil strategic position as a key global food supplier is paving the way for a consistent growth in the coming years, she added.

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