April 24, 2015

Brazilian Soy Producers Face Higher Fertilizer and Fuel Costs

The Brazilian currency has weakened significantly over the past year resulting in both benefits and additional costs for Brazilian farmers. A weaker currency benefits farmers when they sell their grain into the export market because the soybeans and corn are priced in dollars, but paid in the local currency. Therefore, as the currency gets weaker, farmers put more money in their pocket for each sack of soybeans they sell. Conversely, a weaker currency makes imported items such as fertilizers and chemicals more expensive

Unfortunately, Brazil imports 75% of its fertilizer needs and fertilizer costs are expected to increase for the 2015/16 crops. The entire increased cost of the imported fertilizers may be difficult to pass along to the farmers due the current low cycle of commodity prices.

At a recent meeting held in the city of Dourados in Mato Grosso do Sul, a researcher from Embrapa, Alceu Richetti, indicated that the cost of production for the 2015/16 soybean crop in the state could increase by as much as 30%. Alceu explained that the average cost of production for soybeans in the region in 2014/15 was R$ 43 per sack and that for the next crop, the cost might increase to R$ 55 per sack. In addition to higher cost for fertilizers, the cost of fuel is increasing as well. During the 2014/15 growing season, the cost of fuel per hectare was R$ 162 and that is expected to increase to R$ 173 per hectare for the next crop.

The total increase in the cost of producing the next soybean crop won't be known until closer to planting time and it will depend on future currency fluctuations. Alceu advised farmers to seek out lower priced fertilizers and not just to rely on the name brands.

The cost of production figures were generated by the Agribusiness Information and Geographic System (Siga/MS) in conjunction with Soybean and Corn Producers Association of Mato Grosso do Sul (Aprosoja/MS). The Signa/MS institution monitors the soybean production in 27 municipalities in the state. The director of Aprosoja/MS, Lucas Galvan, explained that Siga/MS started collecting data during the 2009/10 growing season in Mato Grosso do Sul including: planting and harvesting progress, crop development, crop production, local soybean prices, and the location and capacity of storage facilities,

Farmers in Mato Grosso do Sul are coming off a record breaking production year in 2014/15 of 6.8 million tons of soybeans making the state the fifth largest soybean producer in Brazil.