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April 12, 2012

Mato Grosso is Primary Location of Crop Expansion in Brazil

Strong prices for soybeans and corn is expected to encourage Brazilian farmers to continue expanding their crop acreage during the 2012/13 growing season. To see where the future expansion of crop acreage might occur, look no further than the state of Mato Grosso. According to Conab's April crop report, which was released earlier this week, Mato Grosso farmers were responsible for 65% of the expansion of soybean acreage in 2011/12 and 60% of the expansion of corn acreage in 2011/12.

According to Conab's figures, the soybean acreage in Brazil increased by 817,000 hectares in 2011/12 with 531,000 of those hectares coming from the state of Mato Grosso alone, or 65% of the total increase. The majority of that increase did not come from the clearing of new land, but rather from the conversion of existing pastureland to new row crop production, especially in eastern Mato Grosso.

For the last several years, the Brazilian agricultural research service, Embrapa, has been promoting the use of degraded pastures as the primary source of new areas for row crop production and their efforts are now paying off. In eastern Mato Grosso, where cattle ranching has been the primary agricultural activity, many ranchers are now looking to soybean and corn production as a better alternative to raising cattle. There are millions of hectares of pastureland that could be easily converted to grain production given the right financial incentives. Those incentives are now in place with record prices being paid for soybeans in Brazil.

Using existing agricultural land to expand soybean production makes a lot of sense because it is cheaper, faster, and it makes better use of existing infrastructure such as roads, and storage facilities. Expanding crop production into new areas that are more remote requires a long-term commitment on the part of the government to building new roads, bridges, grain storage facilities or even new towns or cities.

As far as Brazilian corn crop is concerned, the total corn acreage increased 1,182,000 hectares in 2011/12 with Mato Grosso corn acreage increasing 712,000 hectares or 60% of the total increase. Ninety six percent of the corn production in Mato Grosso is safrinha corn planted after the soybeans are harvested so nearly all the increased corn acreage in the state was the result of expanding the safrinha corn acreage.

As the soybean acreage increases, it is relatively easy to expand the safrinha corn acreage since it is planted in the same field. In recent years, farmers in Mato Grosso have been moving toward planting more early-maturing soybeans in order to allow enough time to plant a second crop of corn. If a farmer in eastern Mato Grosso plants a 95-day maturity soybean variety during the second half of September (the earliest day they are allowed to plant is September 15th), those soybeans will be mature and ready for harvest in late December or early January. That would allow ample time to plant a second crop of corn during the ideal planting window which stays open until about the end of February. The earlier the corn can be planted, generally the higher the yield prospects for the crop.

With new environmental regulations making it more difficult to clear new land in Brazil, the trend of converting existing pastureland into crop production is expected to continue being the primary source of new crop acreage in the country.