April 18, 2012

Crop Production Cost in Brazil to Increase due Mainly to Fertilizers

As farmers in Brazil start preparing for their 2012/13 growing season, they are happy to see strong commodity prices, but they will also be facing higher production costs as well. The primary reason for the increased costs is the increasing demand and costs of fertilizers.

According to the Mato Grosso Institute of Agricultural Economics (Imea), the average cost of producing soybeans in the state is expected to increase 11.8% in 2012/13 to R$ 1,814.58 per hectare compared to R$ 1,622.00 per hectare the previous year. In central Mato Grosso for example, which is the largest soybean producing region in the state and also the region where farmers use the most fertilizers, the average cost for fertilizers is R$ 522.60 per hectare or approximately US$ 120 per acre.

The cost of producing corn in the state is expected to increase 3% from R$ 1,456 per hectare last growing season to R$ 1,499 in 2012/13. Nearly all the corn produced in the state is planted as safrinha corn after the soybeans are harvested and since the safrinha corn is relatively low yielding, farmers in the state are conservative in how much inputs they apply for the corn. The cost of producing cotton in the state is actually expected to decline slightly from R$ 4,781 last growing season to R$ 4,738 this year.

The increase in fertilizer sales in Brazil continues at brisk pace. In 2009, sales of fertilizers in Brazil were 22.5 million tons and that increased to 24.5 in 2010 and it increased even further in 2011 to 28.4 million tons. These types of increases are expected to continue in 2012 due to strong commodity prices, increase in crop acreage, and a desire to increase productivity from existing acres.

The four markets responsible for 80% of the world's fertilizer consumption include China at 28% of the total, India has 16%, Latin America, which is principally Brazil, consumes 8%, and North America, which is mostly the U.S., consumes 5%.