Rural Product Notes market reaches R$ 313 Billion in 2024, highlighting an expanding sector. Blockchain innovations have the potential to further boost this growth, creating a global distribution channel that facilitates access to agricultural credit.

In April 2024, Brazil’s agricultural financing sector witnessed a significant milestone, highlighting the growing role of Rural Product Notes (CPRs). Established by Law №8.929 of 1994, CPRs reached a total of R$ 313 billion, marking an annual growth of 40%. Furthermore, the average value of these securities in February was R$ 1.37 million, as pointed out by the Secretariat of Agricultural Policy of the Ministry of Agriculture.

The reason is that Rural Product Notes (CPRs) are a financial tool that facilitates agricultural financing by allowing producers to anticipate revenue through the promise of future product delivery. In this arrangement, farmers, who are the issuers, obtain financing often secured by real estate guarantees, which enables crop cultivation while offering investors a negotiable security in both organized and over-the-counter (OTC) markets. The security of these operations is enhanced by custody entities, such as CETIP, which ensure the fulfillment of promised deliveries. Moreover, investors benefit from exemptions from Income Tax and IOF. However, it is worth noting that, due to the nature of the payment scheduled for the maturity of the security, liquidity is still considered low.

Rural Product Notes (CPRs) play a crucial role in financing Brazilian agribusiness. There are two main types of CPR: Physical CPR, which requires the physical delivery of the product specified in the note, and Financial CPR, which was established by Law №10,200 of 2001 and allows for financial settlement at maturity for the amount agreed upon at the issuance of the security.

The adoption of blockchain technology can significantly boost these instruments. By simplifying the issuance and trading process, this innovation not only enhances security but also creates a global distribution channel, enabling international investors to easily access this type of agricultural credit. This advancement represents a significant bridge between the Brazilian market and global capital, expanding financing opportunities in agribusiness.

In this way, the innovation of blockchain structure and the implementation of smart contracts that can even be applied to Rural Product Notes (CPRs) simplify the verification and execution of transactions, reduce errors and fraud, and consequently cut costs significantly — a considerable benefit that encourages more producers to adopt this new form of credit. The transparency and efficiency brought about by tokenization are also attracting new investors, especially those interested in opportunities in emerging countries with returns above the global average in agribusiness. Moreover, they allow for greater liquidity of assets, a crucial factor for the financial health of rural producers who rely on cash flow to maintain their operations, as well as for investors.

As financial institutions and fintech startups intensify the development of blockchain-based solutions for agribusiness, the market for Rural Product Notes (CPRs) foresees a future of continuous expansion. The active involvement of regulators and the need for legislative adaptation to new technologies are crucial to harness the benefits of tokenization, ensuring a safe and favorable business environment for sustainable economic growth.

Therefore, according to the stock of bank and non-bank credit in Brazil, which amounts to two-thirds compared to the entire Europe, it confirms the significant influence that CPRs have. Thus, the tokenization of CPRs is not only progressing towards access to credit in Brazilian agribusiness but also establishing a new paradigm for global agricultural financing, marking the beginning of an era of greater financial inclusion and operational efficiency.

Authored by

Tiago Piassum Theodoro, founder of Rivool Finance.