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Veto to PSR Reduces Federal Subsidy, Increases Climate Risk, and Threatens the Stability of Brazilian Agribusiness in 2026.
The rural insurance, the centerpiece of the country’s agricultural policy, has returned to the center of debate in Brasília after President Luiz Inácio Lula da Silva vetoed a provision of the 2026 Budget Guidelines Law (LDO) that protected the resources of the Rural Insurance Premium Subsidy Program (PSR).
The decision comes at a time of strong advancement of Brazilian agribusiness, but with a retraction of coverage against climate risk, increasing uncertainty for producers, insurers, and the government itself.
Presidential Veto Exposes Fragility of PSR
Congress had approved an amendment to the LDO aiming to shield the PSR budget from cuts, blockages, and contingencies.
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The intention was to guarantee predictability and ensure the full application of the federal subsidy to rural insurance in 2026. However, the provision was vetoed by the Executive.
According to the government, maintaining this shielding would reduce the flexibility of budget management and make it difficult to comply with fiscal rules.
Nevertheless, the veto reignited concerns in the productive sector, which sees the PSR as an essential instrument for financial stability in the field.
Budget Shrunk and Coverage Dropped to Historic Levels
Recent numbers help to frame the problem.
In 2025, the initial budget for the PSR was R$ 1.06 billion but was cut by 47%, dropping to R$ 565.5 million.
As a consequence, the insured area retreated to 3.2 million hectares, the third worst result since the beginning of the historical series in 2007.
Moreover, the total number of protected crops was well below that of the previous year when about 7 million hectares had federal subsidies.
Only 42,000 producers were attended, and the total insured amount reached R$ 17.7 billion, far from the peak of R$ 66.4 billion observed in 2021.
Lack of Predictability Concerns Insurers and Producers
According to Glaucio Toyama, president of the Rural Insurance Commission of the National Federation of General Insurance (Fenseg), the veto deepens an already delicate scenario.
“The removal of budget shielding returns to agribusiness and the rural insurance market the lack of predictability and tranquility for planning among insurers, producers, and reinsurers,
making it difficult to offer products at costs compatible with the reality of tight margins in the field,” he states.
According to Toyama, even with the growth of agricultural production, financial protection shrinks precisely when extreme events become more frequent.
Climate risks, such as prolonged droughts and intense rains, pressure the margins of farmers, who struggle to bear the cost of the policies.
Rural Insurance Market Loses Strength
Sector data confirms this trend. Between January and October 2025, the revenue of insurers from rural insurance fell by 9.3%, totaling R$ 11.1 billion.
The payment of indemnities also decreased by 3.9%, to R$ 3.6 billion.
For Toyama, this trend reveals a concerning cycle: the producer suffers losses from crop failures, the government needs to renegotiate debts on an emergency basis, and thus the budget is further pressured, opening space for new cuts in programs like the PSR.
Rural Insurance as a Strategic Public Policy
In the assessment of Rodrigo Motroni, vice president of Newe Seguros, the impact of the veto goes beyond the insurance market.
“Rural insurance guarantees security for the farmer, provides stability to credit, reduces systemic losses, and contributes to food security and Brazil’s competitiveness.
It is not only an issue for the insurance sector but a public policy concern,” he argues.
In 2025, Newe sold over 1,700 policies with federal subsidies, totaling over R$ 500 million in insured amounts, highlighting the relevance of the instrument for financing production.
Paradox Between Agricultural Expansion and Low Coverage
The National Confederation of Insurers (CNseg) points out a structural paradox. While the planted area in Brazil advances to about 97 million hectares, only approximately 3% of this total currently has rural insurance.
This mismatch between rising productivity and low climate risk mitigation exposes Brazilian agribusiness to significant losses, especially in a context of more intense climate change.
Congress May Overturn the Veto
The presidential veto can still be overturned. For this, the agribusiness caucus needs to gather an absolute majority in a joint session of Congress: 257 votes from deputies and 41 from senators, counted separately.
The president of the Parliamentary Front of Agriculture (FPA), Deputy Pedro Lupion (Republicanos-PR), classified the veto as “concerning” and reinforced the need to restore PSR resources.
Meanwhile, the Ministry of Agriculture claims that there are no budgetary pending issues and projects to fully apply the R$ 1.01 billion planned for 2026.
The official expectation is to assist 82,000 producers, subsidize up to 130,000 policies, cover 7 million hectares, and achieve R$ 48 billion in insured amounts.
However, for the sector, the overturning of the veto is seen as decisive.
“Restoring PSR funding and strengthening rural insurance is a basic condition for ensuring income, credit, and continuity of production”
summarizes Toyama, highlighting that the agenda for 2026 necessarily involves the outcome of this dispute in Congress.
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