August 16, 2012

Soy Production Costs Rise in Mato Grosso to Record High

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

While GMO soybeans are planted on the majority of acres in southern Brazil, soybean farmers in Mato Grosso still have the option of planting conventional soybeans (non-GMO). The Mato Grosso Institute of Agricultural Economics (Imea) released a recent study where they concluded that the cost of producing both types of soybeans is practically the same at R$ 2,130 per hectare.

Farmers worldwide have adopted GMO soybeans primarily for their management flexibility during planting. GMO soybeans can be treated with herbicides any time after planting thus allowing planting to progress faster. Herbicide treatments for conventional soybeans must be applied during a specific time window which slows down planting progress especially if a farmer has extensive areas of soybeans to plant.

As far as the cost of production is concerned in Mato Grosso, both types of soybeans are about the same. Conventional soybeans are cheaper to purchase, but they require more expenditures for herbicides, whereas GMO soybeans are more expensive to purchase, but they require less herbicides to control weeds.

One of the bigger differences between the two types of soybeans is the cost of herbicide applications. Herbicide costs for conventional soybeans is 23% more expensive than for GMO soybeans (R$ 110 per hectare for conventional and R$ 86 per hectare for GMO). The reverse is true for seed cost. GMO seed cost 15% more than conventional seed (R$ 110 per hectare for GMO and R$ 95 per hectare for conventional).

The recommended insecticides for GMO soybeans are a little more expensive than the recommended insecticides for conventional soybeans (R$ 155 per hectare compared to R$ 144). Fungicide treatments for the control of soybean rust is the same for both types of soybeans at R$ 105 per hectare.

Regardless of type of soybeans farmers in the state decide to plant, the cost of producing soybeans in Mato Grosso in 2012/13 is going to be the highest on record. Imea estimates that it will cost R$ 2,130 to plant a hectare of soybeans in 2012/13, which would be 28% more than the R$ 1,640 it cost in 2011/12. These calculations are based on a production of 52 sacks per hectare (3,120 kg/ha or 45 bu/ac) and an exchange rate of 2.03 Brazilian reals per dollar. The reason why it is more expensive this year is due primarily to the exchange rate between the Brazilian real and the U.S. dollar.

The Brazilian currency has weakened 27% over the last 12 months (1.61 Brazilian reals per dollar in July 2011 vs. 2.03 reals per dollar in July 2012) and since most fertilizers and chemicals used in Brazil are imported, the costs of these products have risen.

Once conventional soybeans are harvested, it cost more to keep their identity preserved during storage and shipping, but in exchange, conventional soybeans receive a premium in the marketplace. Conventional soybeans receive R$ 2 to R$ 5 per sack more than GMO soybeans (US$ 0.45 to US$ 1.10 per bushel).