April 18, 2011

Soybean Profits for the 2010/11 Growing Season Soar in Brazil

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

With the soybean harvest wrapping up in the major producing states such as Mato Grosso and Parana, Brazilian soybean farmers are closing the books on one of the most lucrative crops in history. Record yields and very high prices are leaving the soybean farmers of Brazil very well capitalized after the 2010/11 growing season.

In the region of Londrina in northern Parana, for every real invested in the soybean crop there will be a return of 1.75 reals. In the region it is estimated that variable costs for producing a hectare of soybeans was R$ 1,198 in 2010/11. The average yield in the region was 52 sacks per hectare (3,120 kg/ha or 45 bu/ac) and each sack sold for an average of R$ 40.10 resulting in profits of R$ 900 per hectare (approximately US$ 225 per acre).

The economics are even better in western Parana where each real invested in soybean production had a return of R$ 1.90. In this region the variable cost of production is estimated at R$ 1,219 per hectare and the average yield this growing season was 53 sacks per hectare (3,180 kg/ha or 46 bu/ac). Each sack sold for an average of R$ 44.40 per sack generating a profit of R$ 1,100 per hectare (US$ 275 per acre) compared to a profit of R$ 567 per hectare (US$ 141 per acre) in 2009/10.

Generally, it was better for Brazilian farmers to hold onto your soybeans as long as possible this year before forward contracting their production. In September of 2010 when soybean prices started to increase, the farmers in northern Parana sold approximately one third of their anticipated production at lower prices. In western Parana only 5% had been forward contracted by the end of September, so they were able to sell their soybeans at higher prices.

Soybean production is expected to be profitable in all regions of Brazil this growing season even including some of the areas soaked by heavy rains during harvest. In the municipality of Sao Gabriel do Oeste in Mato Grosso do Sul, yields were reduced 30% by the heavy rains during harvest, but due to the high prices for soybeans, most producers will still generate enough income to pay their bills and generate a small profit.